Car insurance fraud: An Overview
25 Jan 2011
by Donald MacKenzie
This is the first article in our 'car insurance fraud' blog series that
will look at the various types of car insurance
fraud, what's being done to reduce it and what further action is
needed. We start with an overview of the problem.
There is no doubt that minor and major fraud is prevalent in relation
to car insurance. This is bad for consumers, that is, the motorists
that pick up the tab via raised premiums.
It is estimated that fraud adds around £44 to the cost of car
insurance while the AA believes that the true figure, taking account of
the probable level of undetected fraud, could be double this.
Minor fraud, especially 'fronting' where an over-25 pretends to be the
primary driver to get cheaper car insurance for an under-25 (who is the
true primary driver but is instead listed as a second driver), is
extremely common.
Indeed, the majority
of people see nothing substantially wrong with fronting, even
although it is fraudulent, illegal and unfairly penalises other drivers
by raising their premium to cover the cost of these higher risk young
drivers getting their car insurance 'on the cheap'.
At the other end of the spectrum are organised
crime gangs making fraudulent claims, including for severe
injuries, that can cost car insurance companies millions per case.
A senior police officer has stated that the police response
to car insurance fraud nationally is "patchy". The policing of car
insurance fraud is significantly under-resourced and lacks the
expertise needed to effectively tackle it, especially at a
supra-regional level.
Criminals are well aware of where the policing of fraud is poorer and
exploit such regions for their criminal operations where the claims
management company, lawyers and doctors work together as a criminal
network to conceal the fraudulent nature of the claim.
By constantly moving around the country, their detection becomes more
complex. However, since the industry-funded Insurance Fraud Bureau
(IFB) was set up to collect claims data across regions and insurance
companies, identifying these claims has become easier and hundreds of
these criminals have been arrested as a result of IFB evidence.
Nonetheless, at present probably at least a half of major car insurance
fraudsters avoid detection and the police would like to develop greater
police and insurance representatives collaboration on this issue with
the development of several regional insurance fraud units.
One way to finance a higher level of law enforcement in relation to
insurance fraud would be to follow the American model of charging $1
per policy to resource the fight against fraud.
Our 'car insurance fraud' blog series:
Car insurance fraud:
Overview (above article)
Car
insurance fraud: Cash for crash
Car insurance fraud: Staged
accidents
Car insurance fraud: Phantom
passengers
Car insurance fraud: Soft
tissue injuries
Car insurance fraud: Written-off
cars put back on road
Car insurance fraud: Fronting
Car insurance fraud:
Witholding license points or past claims
Car insurance fraud: The
Insurance Fraud Bureau (IFB)
Car insurance fraud: The Police Point of View
Car insurance fraud: What it costs
Car insurance fraud: The fight
against it
Car insurance fraud: The Conclusions
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