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Insurance fraud hits record levels

Insurance fraud hits record levels

Category: Insurance

Updated: 30/05/2014
First Published: 30/05/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Latest figures from the Association of British Insurers (ABI) have revealed that insurance fraud hit record levels in 2013, led by fraudulent motor insurance claims which have seen a steep rise.

Let's take a look at the stats:

  • A total of 118,500 bogus or exaggerated claims were detected by insurers last year, averaging 2,279 per week and £10,813 per claim. Even though there was a slight fall in the number of claims uncovered, the value of those claims increased by 18% compared to 2012's figures to reach a record £1.3 billion.
  • Fraudulent motor insurance claims posted a sharp rise, this time increasing by 34% to hit 59,900, and their value increased by a similar amount to reach a total of £811 million, up 32% on the previous year.
  • The number of fraudulent general insurance claims has been on a general upwards trajectory for years, with the value of claims having doubled since 2007 and the number up by 30% over the same period.
  • There's slightly better news in the home insurance industry, however, with both the number and value of bogus claims falling over the year – a total of 35,000 frauds were detected at a total of £137 million, posting falls of 38% and 24% respectively.

Bar the home insurance industry, the level of fraud overall seems to clearly be on the rise – and it's growing into a specific area of organised crime. "Crash for cash" gangs, for example, stage motor accidents just to claim on insurance, a particularly worrying occurrence that puts paid to the thought of fraud being a victimless crime.

It's no longer just the insurance industry that suffers but people's lives are being put at risk too, and let's not forget that an increase in fraudulent claims could well trickle down into higher premiums across the board.

Happily, though, there are things that are being done to tackle this growing problem. The Insurance Fraud Enforcement Department, a specialist police unit set up in 2011 to tackle insurance fraud, has so far made 470 arrests and 85 prosecutions, while calls to the Insurance Fraud Bureau's
Cheatline rose to 6060 in 2013 – up 32% on the previous year.

Meanwhile the
Insurance Fraud Bureau itself, a body that was created in 2006 to specifically tackle organised motor insurance scams, is currently supporting police forces and insurers to investigate 110 'crash for cash' scams – scams which alone represent some £120 million.

Aidan Kerr, the ABI's assistant director, head of fraud, commented on the latest findings:

"The vast majority of customers are honest and rightly expect tough action against the fraudsters. Insurance fraud is not a victimless crime, which is why the industry invests £200 million a year in fraud detection. The more that is done to crackdown on the dishonest, the quicker and more effectively insurers can deal with the claims from the honest majority.

"The message is clear: never has it been harder to get away with committing insurance fraud; never have the penalties - ranging from a custodial sentence and a criminal record to difficulties in obtaining financial products in the future - been so severe."

It's hoped that the various measures aimed at tackling insurance fraud will have the desired effect, ideally leading to both the number and value of fraudulent claims starting to recede – something that will be good for everyone's pockets.

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