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Insurance fraud increases by 9%
29 July 2011
by Hugh Bryant
According to the
latest figures from the Association of British Insurers (ABI),
insurance fraud increased by 9% in 2010 compared to the previous year's
figures.
There
are 2,500 fraudulent insurance claims every week with an annual cost of
£919 million. Over the last five years, the
number and cost
of these claims have both increased by 100%.
40,000
of the 2010 claims (30% of the total) were car insurance fraud. Bogus motor
insurance claims are the most costly, accounting for 51% (£466m)
of the total cost of all known cases of insurance fraud.
Detection
rates have improved. The savings from detected frauds amounted to 5% of
all claims in 2010, compared to 4% in 2009.
Insurance
companies are increasingly identifying fraud via social media sites,
such as Facebook. In one case, a bogus claimant that alleged
severe back injuries had posted Facebook images of her performing
gymnastics and preparing for a charity run.
Known
fraud adds £44 to every insurance premium while undetected fraud
probably at least doubles this figure. Insurance fraud is estimated to
cost the country £2bn a year.
The
ABI’s Director of General Insurance and Health, Nick
Starling, comments: "Insurers are working harder than ever to protect
honest customers against fraud. The savings made by weeding out
fraudulent claims would otherwise end up being paid for by honest
policyholders through higher premiums."
He adds: "Fraudsters continually look for new ways to con insurers, so
we are upping our game."
The ABI is financing a new Insurance Fraud Unit that is to be set up by
the City of London Police and will employ 35 people. The development of
this new unit occurs in tandem with the setting up of a new National
Insurance Fraud Register that is expected to be operational by early
2012.
The new register, also paid for by ABI members, allows insurance
providers to share data on known insurance cheats, making it easier to
identify those that have previously filed fraudulent claims. The new
database will build on the data already available to the industry from
other databases, including from the Insurance Fraud Bureau (IFB).
Glen Marr, Director of the Insurance Fraud Bureau says: "Fraudsters
will increasingly find the insurance industry a hostile environment.
The IFB is committed to supporting insurer efforts to systematically
root out and tackle fraudsters."
Outlining the increasing reach and capability of the Insurance Fraud
Bureau, he commented: "At the IFB we have access to a significant
volume of industry data, use sophisticated and powerful analytical
software, work in partnership with insurers, law enforcement and
regulators, and have no shortage of reports being received from
consumers of their knowledge or suspicions of those concerned with
defrauding the industry, through our Cheatline facility."
He also pointed out that the major insurance fraud that is most costly
to the industry is masterminded by organised crime networks that pose a
threat to local communities and are not just involved in
insurance-related crime.
Often, in multi-million pound car insurance scams, lawyers, claimants,
claims managers, repair companies and others involved in the scam are
known to each other and may be related. This is exactly the type of
crime that the new London-based Insurance Fraud Unit will aim to more
effectively detect.
However, the industry is not complacent about smaller-scale fraud
perpetrated by individuals without criminal connections. The IFB, for
example, recently wrote to insurers in relation to over 17,000 cases
where they thought 'fronting'
was likely.
Other measures to reduce fraudulent car insurance applications include
insurers checking the IFB database to see for themselves whether
drivers have made previous claims and the Government offering insurers
access to the DVLA database to see whther the applicant's license has
any penalty points.
Honesty is now more important than ever when applying for or claiming
on a car insurance policy as from early next year, those found to be
fraudulent will be listed on the new ABI databse and this will make it
more expensive and more difficult to secure insurance cover in the
future.
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