Insurance fraud: Counting the cost
Adrian Lowery
INSURANCE fraud is undergoing something of a sea-change – in both its character and also in the public's perception.
Organised gangs are becoming more sophisticated, while the average punter is becoming less tempted to have a go at what it sometimes seen as victimless crime. But as the costs land on the premium-payers, insurance fraud should be something to worry us all.
Figures out this week show a huge increase in the detection of all sorts of insurance claim cheats, from the average opportunist punter to criminal rings. Companies are now exposing £3.5m a week in dishonest claims, according to the report from the Association of British Insurers.
Its insurers, who cover two-thirds of the general insurance market, uncovered fraudulent claims valued at £200m in 2004, a 95% rise on 2002.
But is insurance fraud a booming enterprise, or are insurers just uncovering more of it? 'It's like looking at the tip of an iceberg,' says Malcolm Tarling, ABI spokesman. 'There's obviously a lot more underneath, but it's very difficult to say how much.'
'What we are seeing is a higher rate of detection of the opportunistic fraudster – the customer who probably would not break most other laws, but thinks 'everyone else is doing it, why shouldn't I',' explains Tarling. 'There's no obvious evidence of a significant increase in the underlying level of this sort of fraud.'
The ABI claims this reflects the increase in resources dedicated to fraud-detection and the adoption of new techniques: more and better-trained staff; more sophisticated and comprehensive data-sharing systems and co-operation among companies; and specific measures such as voice-stress analysis and the Cheat Line, which people can use to report suspected fraud.
But also it seems that punters are becoming more reluctant to send in a dodgy insurance claim. The results of an ABI survey show that 7% of respondents had at some time made a fraudulent claim. Of those:
• 23% did it because 'everyone else does'
• 22% because it they saw it as a 'victimless crime'
• 20% because 'the companies can afford it'
• 14% because 'there's not much chance of getting caught'
The gravity of individual frauds vary from the inflating of a legitimate claim to determined criminals who concoct false scenarios – premeditative fraud.
But Tarling reckons the increased detection is having the desired deterrent effect, at least among the former group, with people realising it's a crime like any other: 'Any fraudulent claim is a crime, and just because it isn't an organised gang, doesn't mean it isn't a serious offence. In the end insurers want to get on with serving honest customers – but to do this they need to separate out the fraudulent ones.'
But is the same occurring with the criminal gangs? There has been a considerable increase in the detection of organised scams and it also appears that the hidden bit of the iceberg may be growing. In common with credit card, internet and identity fraud, as the sectors' preventative measures get more sophisticated, so do the tactics of the criminals.
Common frauds detected include staged motor accidents involving gangs who deliberately stage collisions with innocent motorists, and then claim for damage to the vehicle and whiplash neck injuries, backed up by witnesses, who turn out to be part of the scam.
Motor insurance is the most fraud-ridden sector of the industry. The ABI recently set up a database to replace the Motor Insurance Anti Fraud and Theft Register, which they estimate is saving an estimated £20,000 a day in detecting and deterring fraudulent motor claims.
But as the sector discovers or cracks down on one particular scam, the gangs devise others, and Tarling says it's difficult to know who's winning the battle.
The ABI is also reluctant to put even a ballpark figure on the total cost to the punter of fraud in terms of increased premiums.
What they are sure of is the necessity and benefit of the ongoing fraud crackdown, particularly in terms of the message it gives out: 'The costs of anti-fraud measures are undoubtedly outweighed by the benefits to the companies and to honest customers - they expect us to tackle fraud as thoroughly as possibly and we believe they benefit from this.' As do the profits on insurance firms' balance sheets, of course.
As for the future, now that the companies feel they have systems in place to root out or deter the casual fraudster, it looks as though the sectors' energies will be increasingly trying to shed light on the shadowy-world of the fraud gangs.
The Cheat Line telephone number is 0800 328 2550.
http://www.thisismoney.co.uk
