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Assetsure News 21st October 2007     Fraudulent Insurance Claims on the Increase   A recent report published by the Association of Insurers (ABI) highlighted a huge increase in the level of fraud claims in 2007, compared to previous years. The data that formed the basis of the survey was initially collected in 2003 and later compared to data collect in 2006. The conclusions are that there is widespread fraud by home owners as insurers had firmly identified a staggering £480 million pounds worth of fraudulent claims. This represents a 300% increase over the previous three years. Even more worryingly, the amount of additional fraud that went undetected by the insurers is estimated to be around £1.6 billion a year. That is an average additional £40 for every honest UK insurance policy owner. To put this into context the total general insurance premiums paid by consumer in 2006 was twenty one billion pounds. The variance between estimated and undetected is mainly made up from commercial motor claims type fraud and organised fraud such as motor claims. Fraud occurs where individual claimants inflate or exaggerate real claims over and above the actual claim amount actually. The report noted that half of this fraud was committed on property insurance uk policies and the average fraudulent claim was around £800. In more serious cases people simply lie about an accident to make a false claim (which accounted for 15% of fraudulent claims by volume and almost 30% of fraudulent claims by value). Typically, people over 45 are less likely to commit insurance fraud and individuals paying over £500 for the home insurance policy half as less likely to have committed fraud. The higher claims are business orientated where the damage and risk is greater as so the claim payout is substantially more than minor home accident type claims, such as wine or paint 'accidentally' spilt on a carpet. The worst and mostly undetected element of fraud is undertaken by organised criminals. Nick Starling, director of general insurance and health at the ABI, said: "The industry is fighting back. Insurance cheats are more likely to be caught than ever before. And cheats will pay a high price as future insurance and credit will be more expensive and harder to obtain." Insurers use a variety of techniques to proactively prevent fraud as well as investigate possible bogus claims once submitted. These include the following; firstly, a shared database of policyholders in order to swap information about customer information, claims scenarios and claims instances since many bogus claims are registered by fraudsters with more than one insurer using similar circumstances. Secondly, insurers employ Loss Adjusters whose role it is to visit claimant’s premises or homes in order to evaluate the authenticity of the claim. They take statements, take photos of any property damage and other paperwork evidence from the claimant, and file a report back to the underwriter with their conclusions regarding the authenticity and/or scope of the damage/ replacement costs Thirdly, staff are trained to use vigilance at all times when assessing the claim in order to detect tell tale signs of fraud, such as paint dropped on a carpet. Last and more recently, new voice recognition software in call centres has enabled insurers to detect a possible lie due to nervousness in the claimant’s voice patterns. Fraudsters are becoming increasing sophisticated in their attempts to defraud insurance companies. The increased use of call centres and reduction in paper based claims is making more difficult to identify.  The battle between big insurers and fraudsters continues.                 back to top   Copyright Assetsure Limited 2007