Insurance fraud is always a risk during times of economic downturn, since the temptation is there to acquire some `easy money.’ But there is a more pervasive tendency towards fraud now in the UK, as recent cases involving a motorhome dealer in Scotland, a 31% rise in reported ghost brokers selling worthless policies, or a Councillor claiming for business loans and Covid grants worth over £430,000 all highlight. Sometimes fraudsters are caught and occasionally jailed, but many escape with large sums that are never recovered and receive suspended sentences. It’s a case of risk vs reward for many and the odds are increasingly favourable in the UK.
But the ABI says that there will be no let-up in cracking down on insurance fraud, the Association of British Insurers (ABI) warned today, as latest figures out today show a fall in insurance scams uncovered last year. Despite a 19% drop in the number of fraudulent insurance claims uncovered last year, because their value fell at a lower rate, the value of the average scam increased to £15,000, up 20% on 2021.
Key findings from our latest figures on detected insurance frauds show that, in 2022:
The total number of fraudulent claims detected fell by 19% on 2021 to 72,600 cases. Of these, the number of opportunistic frauds decreased by 18% to 63,000 cases. While this suggests that the industry’s warnings about the grave consequences of committing fraud may be deterring some people, the drop in volume has to be viewed in the context of market developments. In particular, there has been a 20% fall in the volume of fraudulent personal injury claims, largely as a result of the Official Injury Claim portal reducing the overall number of small personal injury claims being made. This reflects the government’s aim of introducing a simplified, fairer, more efficient, and cost-effective compensation system.
Motor insurance continues to make up the largest volume of fraud cases at 42,500, representing 59% of total insurance claims fraud.
While the volume of claims fraud fell significantly, the total value of claims fraud fell by just 4%, with the value of opportunistic fraud increasing by 2%, with a total cost to the industry of £1.1billion. The average fraud, rose to a record £15,000, up 20% compared to 2021. This in part reflects the rise in the value of property frauds, which rose to £134m, up 8% on 2021, and higher inflation.
Case studies of some of the cheats exposed.
Travelling to prison. A man was jailed for 16 months for making 15 bogus travel insurance claims valued at £75,000, using the identities of people he knew.
Mis- management leads to jail. A fraudster was jailed for four years, as a result of him cloning the identity of a claims management company to arrange over 60 false motor insurance claims, worth £26,000.
Ghost broker con very real. A London man stood to pocket £50,000 by acting as an illegal insurance intermediary (known as a ghost broker) and selling fake motor insurance.
No petty scam. An employee at a veterinary practice was caught claiming over £37,000 in fraudulent pet insurance claims. The woman took out pet insurance policies with six insurers and made a total of 18 fraudulent claims against them over four years. In most cases, she made up the names and breeds of the animals that she had taken out the policies for. She altered invoices for medical treatment that the practice had sent to genuine clients, so that they appeared to have been issued to her and submitted them to the insurers to evidence her claims.
Left feeling sick after medical scam. A man was jailed for making bogus medical claims worth £24,000 against 3 insurers. These involved submitting fake receipts for non-existent medical treatments.
Crash for cash is still popular, despite dashcams and built-in cameras in many prestige cars.
Mark Allen, the ABI’s Assistant Director, Head of Fraud and Financial Crime, said:
“While it is good to see the industry’s collaborative efforts delivered results in 2022, there can be no room for complacency. With many households and businesses continuing to face rising costs, now more than ever honest customers expect insurers to weed out the cheats and focus on paying genuine claims as quickly as possible.
“Fraud is now the most reported crime in England and Wales. As financial hardship increases, previously honest customers could be tempted to ‘act in the moment’ to exaggerate claims. These latest figures highlight that some fraudsters are aiming big, with some large frauds uncovered. This shows why there can be absolutely no let-up in pursuing insurance fraudsters. Honest customers rightly expect nothing less. It is also important that consumers remain vigilant to potential scams. The golden rule is never act in haste – if a deal appears too good to be true, then it probably is. If you suspect a fraud has been committed, you can report it confidentially to the IFB’s CheatLine on 0800 422 0421”
Ursula Jallow, Director at the Insurance Fraud Bureau (IFB), said:
“ABI’s new figures show that our determined efforts to prevent fraud are clearly making an impact, but we can’t let our guard down now. Insurance scams are widespread across the UK, and fraudsters are using increasingly sophisticated tactics to prey on vulnerable people and businesses.
“We’re committed to our collaboration with insurers, police and government, to help bring all fraudsters to justice. The consequences are serious. Those who deliberately lie on an insurance application or claim will be put on the Insurance Fraud Register (IFR), which can deny them access to essential insurance services for years to come. Fraudsters also face a potential criminal conviction and imprisonment.”
“The economic climate coupled with the impact of legislative changes has created an environment that is driving the trend in the value of fraudulent insurance claims upwards. The insurance industry is experiencing an unprecedented level of fraudulent claims layering, fraudulent exaggeration and claims inflation. The level of the increase is replicated in our own data at Clyde & Co where we are tracking a 15.2% increase in fraudulent exaggeration. Whilst this trend is being experienced across all claim types there are some developing themes.
High value credit hire claims in suspicious RTA’s remain a focus as does the issue of medical layering. Property claims are also being targeted – everything from high value jewellery to expensive escape of water claims and commercial losses. This trend of increased value is set to continue and intensify in the coming months.
With more legal change on the horizon in the form of the extension to Fixed Recoverable Costs, behaviours will intensify as fraudsters and enablers look to maximise the value of the overall claim. Value will become a driver to pushing claims outside of a fixed costs regime or on to a more lucrative banding. Data collection and data insights will continue to be critical for insurers in their efforts to remain vigilant in identifying and challenging emerging fraudulent behaviours and fraud risk. ”