Recession sparks surge in insurance fraud

Published on Wednesday 15 April 2009 21:32

INSURANCE fraud soared to record levels last year as the economic downturn sparked an increase in spurious claims, according to figures published today.

The number of fraudulent claims made in 2008 reached 107,000, a 17 per cent increase from the previous year, according to the Association of British Insurers (ABI).

It revealed that the value of the claims was up 30 per cent from 2007 to 730 million, with motor insurance claims accounting for almost half the total value. The figures are the highest since the ABI started collecting the data in 2004.

The rise was attributed to the recession, with more people looking to fraud as a way of obtaining easy money.

Nick Starling, director of general insurance and health at the ABI, said yesterday that evidence from previous downturns indicated that fraudulent behaviour rose in difficult economic times.

With this in mind, insurers have been clamping down on insurance cheats. Starling explained: "Fraud adds an extra 40 a year to the average premium, which is why the harder we make it for the cheats, the more competitive premiums will be for honest customers.

"Cheating on your insurance really does not pay – you will get caught, future insurance will be more expensive and, along with credit, harder to obtain."

Home and motor insurance fraud account for the vast majority of cases. Insurers identified over 55,000 false or exaggerated home insurance claims last year, worth 110m. They also detected more than 35,000 motor insurance claims worth 360m.

In some motor insurance cases, policyholders have set fire to their car and claimed it had been stolen, often to cover hire purchase agreements. The ABI highlighted a claim in which a policyholder said his car had been stolen following a mugging. Investigators discovered the fraudster had sold the car to a friend.

Of the remaining cases, there were 9,800 fraudulent commercial insurance claims, with a total value of 240m; 4,300 were made on travel insurance policies, to a value of 5m; and 2,500 were made on creditor insurance plans, worth 19m.

About 4 per cent of all claims, by value, were fraudulent, compared with 3 per cent the previous year.

Separate research commissioned by the ABI found that one in five people would consider making a fraudulent insurance claim in the future, despite the threat of a criminal conviction or being unable to secure insurance subsequently.

It echoed research last week by moneysupermarket.com, which found that 36 per cent of drivers would lie and make a fraudulent car insurance claim.

The ABI figures come just days after the Insurance Fraud Bureau announced a sharp rise in suspected cases. It said its Cheatline facility, which encourages the public to report insurance fraud, had its busiest months on record in the first two months this year, with more than 255 reports.