Insurance is there to protect your finances should something be lost, stolen or damaged beyond repair, but unfortunately not everyone uses it for its intended purpose. An increasing number of people are in fact turning to insurance fraud to line their own pockets, and that could have an impact on everyone's costs.
Aviva detected over £110 million worth of insurance fraud in 2013, up 19% on 2012's figure, with them detecting an average of over 45 fraudulent claims every single day. The bulk of those claims are to do with car insurance, with motor injury fraud accounting for 54% of all detected fraud costs – and over 50% of those are down to organised criminals making "cash for crash" claims, where they deliberately stage an accident to get compensation.
Insurance fraud can come in a variety of forms, from exaggerating injuries to making entirely false claims, and it's increasingly being carried out by third parties and organised gangs. The idea that insurance fraud is a victimless crime is something that should definitely be changed – staging an accident not only puts other motorists at risk, but it means emergency services are diverted away from those in true need.
The insurance firm itself is currently investigating around 5,500 suspicious claims linked to known fraud gangs – an increase of 20% since 2012 – while the Insurance Fraud Bureau estimates that around 1 in 7 personal injury claims are linked to cash for crash scenarios, with the cost to insurers being an estimated £392 million each year.
However, even though the majority of people believe insurance fraud is unacceptable – the view of 9 in 10 of those surveyed by Aviva – many will turn a blind eye to instances of it, with 66% of those surveyed saying they wouldn't report it to the police if someone they knew had committed insurance fraud, up 53% in five years.
Worryingly, 23% of those surveyed knew someone who had exaggerated a genuine claim while 17% knew someone who had faked a whiplash injury to receive compensation, so it's a more far-ranging problem than might be assumed.
Think it doesn't affect you? Think again – even if you're not an unsuspecting victim of cash for crash, insurance fraud adds around £50 to every single premium (according to estimates from the Association of British Insurers), and that's money straight out of your pocket.
"A combination of factors including the economic climate, social attitudes towards insurance fraud as a 'victimless crime', and a lack of effective deterrents are increasing the frequency of insurance fraud," said Aviva's head of fraud Tom Gardiner, but it's hoped that improved detection processes could help to bring the level of fraudulent claims – and the resulting increase to insurance premiums – back down.
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