Insurance fraud inflates the cost of every single insurance policy by $70 more than necessary, according to Police Minister Bob Wiese.
Mr Wiese said fraud was a blight on our society and people who exaggerated their insurance claim were committing a criminal act as much as a thief stealing thousands of dollars.
Launching the Fraud Reward Scheme today, the Minister said there was no such thing as a victimless crime and it was the community which would ultimately bear the burden of insurance fraud.
"In insurance fraud, the victims are not the insurance companies," he said.
"The victims are those people who try to do the right thing - the average Australians who take out policies to protect their assets, properties and businesses."
Mr Wiese said insurance fraud added $1.2 billion to the payout insurers made every year and the fraudulent claims came from all different classes of insurance and from all types of people.
The Fraud Reward Scheme would be operated through the Crimestoppers program in Western Australia with the backing of the Insurance Council.
The scheme would raise the 'climate of risk' for anyone planning to make a fraudulent claim on their insurance company with the threat of being 'dobbed in'. Those people supplying important information to police would remain anonymous and be paid a reward.
"Ordinary members of the public who may believe their inflated claims are fair enough return following years of paying premiums should remember that is not the way the system was ever designed to work," Mr Wiese said.
"They are the ones forcing insurance companies to charge more for insurance cover which in turn impacts on honest, community-minded people."
The Minister said the insurance fraud estimates on workers' compensation claims alone totalled more than $450 million - money that had to be made up by employers which consequently reduced the effectiveness of their businesses.
"The cumulative result is that people committing insurance fraud are having a much greater impact on our society than most of us realise," he said.
"The $1.2 billion lost in fraud could be invested back into the Australian community rather than being paid out to petty criminals."
Media contact: Mark Thompson 322 2311