Value of fraudulent claims uncovered by insurers in U.K. hits record level

Although the number of detected fraudulent insurance claims uncovered by insurers in the United Kingdom was down slightly last year, the value rose 18% to a record £1.3 billion in 2013 compared to 2012.

Figures published Friday by the Association of British Insurers (ABI) show that insurers detected 118,500 bogus or exaggerated insurance claims in 2013, and the average fraud detected across all types of insurance products was £10,813.

Since 2007, ABI reports the value of dishonest general insurance claims detected has more than doubled, while the number has increased 30%.

Fraudulent motor insurance claims were the most expensive and common, ABI notes, with the number of dishonest claims climbing 34% to 59,900 in 2013. The value of the claims was also up significantly – 32% – to £811 million.

That compares to the number and value of property insurance frauds – 35,000 frauds worth £137 million in 2013 – which fell 38% and 24%, respectively, compared to 2012.

Examples of insurance cheats exposed include:

• 60 people, including seven members of the same family, were convicted of a crash-for-cash staged accident fraud that involved more than £514,000 being claimed from 25 vehicle crashes alone;
• a bus company was forced to scrap a bus route after it was targeted by crash-for-cash fraudsters; and
• a woman was jailed for 22 months following a series of invented street robberies for items, including laptops and designer clothes.

The Insurance Fraud Bureau (IFB) was created in 2006 to specifically tackle organized cross industry motor insurance scams, notes the ABI statement. Currently, the IFB is supporting police forces and insurers investigate 110 crash-for-cash scams, which represent approximately £120 million of financial exposure to insurers.

“The vast majority of customers are honest and rightly expect tough action against the fraudsters,” Aidan Kerr, ABI’s assistant director, head of fraud, says in the statement. Noting that the insurance industry invests £200 million a year in fraud detection, Kerr adds “the more that is done to crack down on the dishonest, the quicker and more effectively insurers can deal with the claims from the honest majority.”

Since being established in 2011, investigations by the Insurance Fraud Enforcement Department – a specialist police unit that receives industry funding and is dedicated to tackling insurance fraud – have resulted in 470 arrests and 85 prosecutions of insurance fraudsters. As well, calls from the public reporting suspected insurance frauds into the Insurance Fraud Bureau’s Cheatline rose 32% to 6,060 in 2013 compared to 2012.

Still, Kerr voiced optimism. “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.”