Bogus claims cast shadow over summer

woman in hammock enjoying sunset on the beach

Some claims management companies and solicitors are using adverts and social media to target holidaymakers who have returned from all-inclusive breaks and are encouraging them to make claims against their tour operators and insurers for sickness or loss of property. So many bogus claims are being made that commentators have branded travel insurance fraud as “the new whiplash scam”.

We have seen a three-fold increase in these types of claims over the last 12 months. Fraudulent activity initially focused on countries such as Egypt, Morocco and Tunisia, but the focus has shifted to Spain, where such claims are now believed to be costing the hotel industry €60 million (£51m) a year. Compensation can run from £750 to £5,000, but some hotels’ insurance policies only cover £5,000-£100,000, meaning accommodation providers must often absorb such claims through their own profits unless cases are brought as a combined action.

Reports of claim management companies sending staff to stand outside hotels and hand out business cards have become more common. Holidaymakers are allegedly being tutored in how to fill in claim forms. What’s perhaps even more concerning is the psychology behind such fake claims. A survey carried out by pollsters at YouGov for our firm found 46 per cent questioned believed it would be acceptable to claim compensation from their tour company if they fell ill with food poisoning on an all-inclusive package holiday even when they weren’t 100 per cent sure if it was due to eating food at their accommodation.

In the poll, 27 per cent thought that it wouldn’t be acceptable, while the remainder “didn’t know”. Only 40 per cent of respondents knew they could claim compensation if they fell ill during an all-inclusive package holiday.

While it’s essential consumers know their rights and it’s only correct they should be able to claim compensation for genuine illness, it’s worrying that 46 per cent think it’s acceptable to make a claim even when they are not sure.

Insurance fraud is sometimes viewed as a victimless crime – why not claim compensation from a big, faceless corporation if it helps to pay for all or part of your holiday? Yet fraud is never victimless.

Although travel insurance fraud hasn’t yet pushed up premiums, you don’t have to look too far to see the effects of bogus claims.

Fraud adds an extra £50 a year onto policies in general, according to figures from the Association of British Insurers, with 130,000 fraudulent claims in 2014 costing the UK more than £1.3 billion.

Concerns over travel claims fraud have prompted the Association of British Travel Agents to raise the issue with the Ministry of Justice. Tour operators and insurers are also taking action to tackle the problem.

Calls are being made to add travel insurance to the Claims Portal, the website introduced in England and Wales in 2010 to handle information relating to the pre-action protocol for low value personal injury claims in road traffic accidents and low value personal injury claims. Including travel insurance in the portal could make the sector less attractive to claims management companies. It is fertile ground in England and Wales because of the compensation system and we are seeing fraudulent behaviour crossing legal systems, including in Scotland.

Ultimately, travel insurers should be prepared to challenge claims they believe are bogus. Like all civil cases, the burden of proof is on the pursuer or claimant to show they fell ill due to food they ate on an all-inclusive package holiday and that the insurance policy should pay for that. If they haven’t told tour operators they are feeling ill while on holiday or sought medical help, a tour operator and/or insurer could consider challenging their claim.

Faced with the onus of proving how and where they contracted food poisoning, many may lose their appetite for bringing a fake claim.

Tony Murray is a Partner with BLM