Fraud is on the rise again, and now costs the insurance industry £4m every day. Despite the fact that this adds £40 on average to each premium in the UK, a recent Experian survey revealed that most people perceive insurance fraud as a victimless crime, and only 14% of people would report an insurance fraudster.
In the face of rising fraud levels, and increasingly ingenious methods of committing fraud, Insurers have their work cut out to protect themselves. This is especially the case for Insurers of property risks - nearly 50% of fraudulent claims relate to home contents and buildings cover.
It is not just at the claims stage that insurers need to be alert - application fraud (which includes insurance proposal forms) showed a year on year rise of 21% for the first quarter of 2007 compared with 2006. The previous year, detected fraud rose dramatically with a 50% increase on 2004, and this growth shows no sign of abating.
Against this worrying backdrop, the Insurance Fraud Bureau has been up and running for nearly a year, with a number of high profile successes under its belt, particularly with regard to staged motor vehicle accidents. It has set up the Cheatline to try to encourage people to report fraud. In addition, it analyses data from the Claims and Underwriting Exchange, the Motor Insurance Anti-Fraud and Theft Register and the Motor Insurance Database to spot multiple claims and persistent claim-makers.
It is hoped that the Fraud Act 2006, which came in to force in January 2007, will further assist Insurers in the fight against fraud, but it is still too soon to assess its impact. So far, several arrests have been made using the new Fraud Act 2007, with the first trial currently expected to start in early 2008.
To help insurers tackle fraud and ideally spot it at its inception, the ABI’s Fraud Committee plans to produce a list of the top 10 most likely risks relating to fraud, and it is likely that several of these will relate to property risks given the number of associated fraudulent claims. Whilst this is unlikely to engender a sea change in insureds’ attitudes to fraud and fraudsters, it may assist Insurers in the fight against fraud, and we will consider its implications for Insurers when it is released.