"Insurers Secret Spy Powers" is the headline this stuff article uses to lure you in and to make policyholders worried about what insurers can do, and by extension, whether they will pay a claim. The day-to-day truth is ordinary.
Although it might be shocking to think of being followed around while going about your business, it does happen, and when you come to think about it, anything one does in public place is usually seen by someone. That's why the law allows private investigators to follow you, after all, they are just getting to see what everyone else sees. So, they aren't exactly secrets.
Neither are they special powers enjoyed by insurers, as the headline of the suggests. If you want to spend your day following someone in public places, you can too. If you want to get someone who is actually good at it to stand in for you, then you, too, can hire a private investigator. Lots of people hire them. Most common of all are employers, who suspect staff are stealing from them; partners, who suspect their lovers are cheating on them; and insurers, who suspect some claimants are being fraudulent.
Of course it is a bit creepy. If I discovered I was being followed it would definitely annoy me. Having said that, I would have to admit that it is legal. Given that the practice is expensive, and can generate negative press headlines like "Insurers secret spy powers". Why do insurers do it?
Fraud. Because with many insurance claims it can be hard to tell from a claim form and a doctor's report whether the claim is real. There are some people out there who will lie on a form and lie to their doctor in order to receive thousands of dollars a month in income protection claims, for example. Unfortunately, because there are some people that do it, probably some people that have perfectly legitimate claims will get investigated too.
The example given in the midst of this article is obviously income protection. The curious feature is that the client was being followed while not on claim. If I had to guess I would say that is because they were suspected of fraud while being on claim, and were considered a risk that they would do it again. The monitoring was probably to establish a baseline of activity while the client was 'at work' to compare with activity while 'on claim' if they claimed again.