The question the Supreme Court had to address was whether the claim would have been equally recoverable if the statement by the insured had been true or false. In essence, its ruling recognises the difference between someone using fraud in an attempt to gain something to which they’re not entitled and someone who lies or is reckless in their statement but stands to gain nothing beyond what they are legally due.

This decision could have serious repercussions on honest customers and to say that the Association of British Insurers was disappointed is an understatement. It viewed the ruling as flying in the face of the efforts that the industry has made and continues to make to crack down on insurance cheats and fraudsters.

The ABI has warned that the decision could push up the cost of insurance and prolong payouts for honest customers as allowing lies could distort the claims process by the time and cost involved in unearthing the fraud and attempting to determine its true implications.

Insurers are in the business of paying genuine claims and do apply a degree of forbearance to their customers. For example, if a customer genuinely damages an item but then produces a fake receipt because they have lost the original, while this is actually fraudulent the fact is the customer has a genuine loss and the fraud does not affect that and most insurers would settle the claim.

However, be in no doubt, inflating the value of an otherwise genuine claim remains fraud at the end of the day. Lies are lies and insurers have a duty of care to their honest customers to investigate suspected fraudulent claims.

While a collateral lie may not impact a claim, fundamental dishonesty and downright fraud could result in a policy being invalidated or a claim being rejected.

Insurers are deadly serious in weeding out fraud. It costs all of us dear so let’s be clear that lying – even a little white one – will not pay.

Kevin Paterson is managing director at Source Insurance