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One scam every minute – ABI reveals the true extent of insurance fraud in the UK

22/08/2018

  • Over half a million insurance frauds detected in 2017 – from lying when applying for cover to making a dishonest claim.
  • One insurance fraud is detected every minute.
  • Conning cyclist, bogus bodybuilder, and bus crash scammers among those caught out.

The ABI’s most comprehensive analysis yet into insurance fraud published today (22 August) highlights that every minute an insurance fraud is now detected in the UK. For the first time, the ABI’s annual detected fraud figures include data on application fraud - where details such as age, address, or claims history are deliberately mis-stated.

The figures highlight that in 2017:

  • A total of 562,000 insurance frauds were detected by insurers. Of these there were 113,000 fraudulent claims, and 449,000 dishonest insurance applications.
  • The number of dishonest insurance claims, at 113,000, were valued at £1.3 billion. The number was down 8% on 2016, while their value rose slightly by 1%. The fall in number reflects the industry’s collaborative work in detecting and deterring fraud.
  • The number of organised frauds, such as staged motor accidents, fell 22% on 2016, with frauds worth £158 million detected. This reflected the work of the Insurance Fraud Bureau (IFB), who are currently investigating a rising number of suspected frauds, and the Insurance Fraud Enforcement Department (IFED). IFED is the specialist police fraud unit investigating insurance fraud, such as staged motor accidents and illegal insurance advisers (so-called ghost brokers). Since its formation in 2006, IFED has secured over 400 court convictions for insurance fraud.
  • The value of fraudulent detected motor insurance claims, at £775 million, rose by 4% on 2016. The number of these frauds, at 67,000, showed a small rise.
  • Fraudulent property insurance claims fell. The number detected dropped by 11% on 2016 to 22,000, with a value of £100 million.
  • Insurers detected 449,000 cases of confirmed or suspected application fraud, where people lied or withheld information to try and get cheaper cover. Motor insurance made up the bulk of dishonest applications, with typical lies including the nature of the applicant’s occupation, and driving record, where previous claims and motoring convictions were not disclosed.

Some of the insurance scams uncovered included:

Pothole claim full of holes. A cyclist claimed £135,000 compensation from a council for injuries he said he sustained when he fell off his cycle after hitting a pothole. However, evidence showed that the accident happened when he fell off on a slippery road at another location. He was jailed for three-and-a-half years.

Bodybuilder pumps up his claim. A bodybuilder, who claimed £150,000 for a back injury, was exposed when he was filmed doing a press-up challenge. He was ordered to pay £35,000 in legal costs.

Bus cheats busted. The ring leader of a gang who staged a bus crash to try to get £500,000 in insurance pay-outs for fake injuries was jailed and banned from driving for two years. Using a rental car, he staged the crash, following which eight of his fellow fraudsters on the bus claimed for fake injuries to necks and hips.

The fraudster of Venice. A student was convicted after attempting to claim £14,000 through six invented claims following a trip to Venice, including the alleged loss of an iPod, laptop and designer watch.

Huge car insurance scam sees over 150 convictions. A four and half year police investigation into a huge crash for cash staged accident operation in South Wales, which netted the ringleaders £2 million, led to the convictions of 150 people.

Selling fake insurance leads to a genuine prison sentence. A man was jailed for three years and eight months for selling fake motor insurance policies to unsuspecting motorists.

Not injured, until the ambulance arrives. After staging a road collision, two fraudsters appeared uninjured until the ambulance arrived, when they then started feigning injury. Each received a jail sentence.

James Dalton, ABI’s Director, General Insurance Policy, said:

“The vast majority of insurance customers are honest, and they rightly resent fraudsters pushing up their insurance costs. This is why the industry makes no apology for spending around £250 million a year on measures to tackle insurance fraud.

“It is good that organised fraud fell, especially as scams like staged accidents can often put lives at risk and involve huge amounts of money. But, with the Insurance Fraud Bureau currently investigating a rising number of suspected insurance frauds, there will be no let-up in the crackdown on the insurance cheats. The rise in opportunistic motor fraud highlights that the stricter regulation of claims management companies, some of whom encourage dishonest claims, cannot come in soon enough.”

Ben Fletcher, Director of the IFB, said:

“These numbers go to show the complexity of the task that insurers and the industry have in fighting insurance fraud. IFB has seen a rise in the number of live investigations, as well as a more diverse range of fraudulent behaviours, as these criminals move to target new areas. Fraudsters are tenacious and regularly change their methods, moving between products, sectors and approaches. They will exploit any area they are able, and the industry faces a constant battle to stay one step ahead.

“We don’t underestimate the challenge we face; insurance fraud is an issue that the industry takes very seriously and has been investing heavily in combatting in recent years. These results are encouraging and demonstrate to the would-be fraudster that the insurance industry is a hostile environment and every effort is being made to catch and stop them.”

 

-ENDS-

 

Notes for Editors

 

Enquiries to:

Malcolm Tarling                        020 7216 7410    Mobile: 07776 147667

Sarah Cordey                           020 7216 7375    Mobile: 07860 189071

Dominic Stannard                     020 7216 7350    Mobile: 07725 245838

 

1. ABI annual detected insurance fraud statistics - background.

The ABI collects information annually regarding detected fraud to provide its members and wider stakeholders with an indication of the extent of detected fraud that the industry faces at both the application and claims stage. In turn, individual insurers have their own mechanisms for understanding their own exposure to fraud and taking steps to mitigate the related risks.

Reporting on and measuring all cases of fraud encountered by insurers presents some challenges. Insurers are able to report on and measure cases of clear detected fraud; that is where evidence of fraud is compelling. However, where an insurer has prevented an individual from obtaining insurance cover by way of, for example, its automated system-based fraud defences, or a claim is no longer pursued due to an insurer probing the circumstances of a loss, such scenarios are not always clear instances of detected fraud. 

Insurers would positively welcome increasing the numbers of convictions for insurance fraud. However, despite significant investment from the insurance industry in the Insurance Fraud Enforcement Department (IFED) within the City of London Police, there is insufficient current police resource available to respond to and manage the number of cases of suspected fraud for investigation and enforcement. This has been compounded by regional police forces over recent years reducing their resources allocated to fraud and financial crime and having no objectives to devote resources to such criminality. As such, actual criminal convictions clearly only represent the tip of the iceberg, and are not a true reflection of the level of fraud that the insurance industry and wider society faces on a daily basis.

Accordingly, the ABI has developed a list of scenarios in which it is believed fraud is likely to be involved and asks its members to provide the numbers of cases which fall into those categories.  While some of those cases may have an innocent explanation, many more cases of successful fraud go undetected, especially for whiplash.  

The ABI’s fraud statistics are therefore intended to provide an indication of the volume and value of fraud detected by the industry. These statistics do not include claims which involve exaggerated personal injury, particularly for whiplash, where the claim has been paid.

The ABI seeks information from its members which fall into the following description, which has been based around the Fraud Act 2006, and reflects the definition adopted in relation to the Insurance Fraud Register:

 

Any party seeking to obtain a benefit under the terms of any insurance-related product, service or activity can be shown, on a balance of probabilities, through its actions, to have made or attempted to make a gain or induced or attempted to induce a loss by intentionally and dishonestly:

 

  • making a false representation; and/or

 

  • failing to disclose information; and/or

 

  • having abused the relevant party's position.

And one or more of the following outcomes has taken place which relates to the fraudulent act:

 

  • an insurance policy application has been refused;

 

  • an insurance policy or contract has been voided, terminated or cancelled;

 

  • a claim under an insurance policy has been repudiated;

 

  • a successful prosecution for fraud, the tort of deceit or contempt of court has been brought;
  • The  relevant  party  has  formally  accepted  his/her  guilt  in relation  to the fraudulent act in question including, but not limited to, accepting a police caution;

 

  • an insurer has terminated a  contract  or  a non-contracted relationship/recognition with a supplier or provider;

 

  • an insurer has attempted to stop/recover or refused a payment(s) made in relation to a transaction;

 

  • an insurer has challenged or demonstrated that a change to standing policy data was made without the relevant customer's authority;

 

Provided that the relevant party has been notified that its claim has been repudiated, or relevant policy or contract voided, terminated, or cancelled, for reasons of fraud and/or it is in breach of the relevant terms and conditions relating to fraud within the relevant policy or contract.

 

 

The ABI also collects from its members’ information relating to cases of suspected insurance fraud:

 

Where  a  handler  having  an  actual  suspicion  of  fraud  (e.g.  manual  fraud indicator(s), tip off, system generated "high risk" referral etc) challenges the applicant/claimant by letter, telephone call or instruction of an investigator etc, to clarify key information, provide additional information or documentation etc, and the applicant/claimant subsequently:

 

  • fails to provide further documentation or co-operation.

 

  • formally withdraws the application/claim (by phone, e-mail or letter) without a credible explanation.

 

  • allows all communication with the insurer to lapse despite the insurer’s reasonable attempts to re-establish contact.

 

  • accepts (without a credible explanation) either a substantially reduced settlement offer in respect of a claim, or a substantially increased premium in respect of an application/renewal (other than in cases where there has been a careless misrepresentation).

 

All other gone away claims/applications arising in the course of normal (i.e. non- exceptional) handling do not represent suspected fraud under this definition. These would include (but not necessarily be limited to):

 

  • gone away/withdrawn claims or applications when no preceding combination of suspicion and subsequent challenge has occurred.

 

  • gone away/withdrawn claims or applications where a "challenge" is applied to all new claims/applications of a particular class (e.g. Household accidental damage) as a matter of routine.
  • lapsed quotes, where no formal application for insurance cover hasbeen made.

 


2. The Association of British Insurers is the voice of the UK’s world leading insurance and long-term savings industry.

A productive, inclusive and thriving sector, we are an industry that provides peace of mind to households and businesses across the UK and powers the growth of local and regional economies by enabling trade, risk taking, investment and innovation.

 

3. An ISDN line is available for broadcast.

 

4. More news and information from the ABI is available on our web site, www.abi.org.uk.

Last updated 22/08/2018