According to the Insurance Fraud Bureau insurance frauds are costing £2.1 billion a year, and add on £50 to each individual policy holder’s premium each year. The variety of fraud ranges far and wide, from claiming more for a damaged or stolen item than it is worth, claiming for a product that does not exist, to organised crash for cash gangs. Other scams include bogus insurance companies selling non-existent policies, to friends who sue each other and share the cash.
The Association of British Insurers (ABI) published statistics relating to insurance frauds in 2013, which state that:
- Roughly 2,279 fraudulent claims were made on a weekly basis, equating to 118,500 across the year
- The average fraud was £10,813
- Motor insurance claims cost the industry the most, with fraudulent claims rising 34% on 2012. The overall value was reported as £811 million, a rise of 32%
- Property insurance fraud fell by 38%
- The overall rise of fraudulent claims has more than doubled since 2007.
The British Retail Consortium Retail Crime survey shows the overall cost is more than double that generated from shoplifting in the UK, yet the average person would feel that shoplifting was a bigger crime than diddling their insurance agent.
The good news for consumers and insurance companies alike is that the government, led by Justice Secretary Chris Grayling, is cracking down on these false claims. This follows on from the campaign to target fraudulent whiplash claims, which has helped drop the cost of motor insurance. The new reforms will tackle insurance fraud both in motor claims and in other areas, such as ‘trips and slips’. The aim is to ensure less money is paid out on these dishonest claims, and the savings can then be passed on to the law abiding customer.
The reforms are reported to include a scheme to discourage lawyers from encouraging people to make claims with the offer of free gifts; improving medical assessments and using only independent medical practitioners; ensuring injuries are confirmed prior to settling any cases; and dismissing compensation claims from court where the claimant is dishonest, in order to prevent more people coming forward with bogus claims.
This follows the Prime Minister’s pledge in February 2012 to address high insurance premiums, as an ongoing commitment to saving the public money on their policies from insurance brokers. The ABI Director General is reported to have commented that he felt these measures are a ‘very positive development for the vast majority of honest insurance customers who end up paying for the fraud of the minority’.
This is also good news for reputable insurance brokers, who pride themselves on delivering a great service at a competitive price. Brokers that use insurance software, already understand the need to run an efficient and organised business. With the help of the government to crack down on insurance fraud, insurance brokers can keep on increasing customer benefits, and offering value for money on all insurance policies.