The insurance industry is increasingly taking what could be termed a ‘lie detector’ approach to both insurance claims and insurance proposal form submissions. It is using collaborative approaches and insurance ‘forensics’ to wheedle out and identify individuals and businesses either seeking to defraud insurers through false or exaggerated claims or pay lower premiums by deliberately lying about their risk.
Since the Insurance Fraud Register launched in 2012, insurers have honed their skills in relation to fraudulent claim detection and the deliberate withholding of information during policy purchase. Insurance intelligence is readily available, with over 300 insurers, managing 90% of UK premiums, sharing information about those identified as insurance fraudsters.
The industry has a zero-tolerance policy in relation to the criminal offence of insurance fraud. Insurers – and the courts – are coming down hard on those whose nefarious actions result in honest policyholders having to pay more for their insurance – on average £50 each.
Some of the £1bn of fraud detected is carried out by organised crime rings running scams such as ‘crash for cash’ – deliberately engineering motor crashes that then enable them to launch claims for injuries to the driver and to ‘ghost’ passengers who were never in the vehicle.
But there are also many fraudulent claims by individuals. A company director has recently received a 12-year bankruptcy restrictions order, having falsely claimed for the supposed theft of agricultural equipment worth £35,000, which had actually been seized by a creditor. As he had already spent the insurance payout prior to the fraud’s detection, he could only repay £1100. Under the court order, severe financial and business restrictions will now be imposed on him until 2021.
‘Fronting’ is another crime. Here, the policyholder takes out motor cover, knowing they will pay a much lower premium than the car’s main intended driver, named on the policy as only an occasional additional driver.
Some insurers are actively defending policyholders in court against fraudulent claims. Frequently, entire claims are repudiated and the fraudulent claimant obliged to pay legal costs, regularly amounting to sums of over £10,000.
Despite major advances in insurance fraud detection, an estimated £2bn is still undetected. New areas of fraudulent activity are also now emerging, often sparked by claims management companies encouraging consumers to claim for mis-sold pensions, noise-induced hearing loss and problems with cavity wall insulation. Around one-in-ten of those contacted by claims management companies have been found to then seek compensation for the reason put to them, despite often having suffered no loss.
Insurance fraud is taken extremely seriously by the police and law enforcement agencies, who recognise that it often funds other serious crimes, including money laundering. Taking a gamble on being caught out is not worth the risk. Prison sentences, bankruptcy notices, orders to pay court charges and blacklisting on the IFR register can all result, with the latter preventing access to insurance policies and many other financial services products besides.
The best way to reduce insurance premiums is not to break the law by lying when answering an insurer’s questions, but to have an expert analyse your risk, suggest how to better manage it through what can be simple measures, and present your circumstances accurately and sympathetically. Getting the best cover, in this way, should also help prevent any temptation to try to claw money back from an insurer through a fraudulent claim.
If you need a broker to help you steer clear of investigation and possible criminal prosecution, by providing cover based on an honest appraisal of what needs to be protected, please get in touch.