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Home Insurance Fraud on the Increase

Its interesting that in the United Kingdom, many people do not consider exaggerating insurance claims to be fraud. According to the insurer, Legal & General, around 29% of people would consider exaggerating a home insurance claim, either by claiming for extra items or increasing the value of things that had been damaged or stolen.

Most of the people that are prepared to claim in this way are perfectly law abiding citizens, alas they do not realise or choose to ignore the fact that making false claims under a home insurance policy (or any other insurance policy for that matter) is a serious offence. Many consider this to be a victimless crime, nobody gets hurt, (apart from the large cooperate insurer that has been taking premiums for years who gets to give some of it’s premium back) Alas, this is not the case, fraudulent claims end up costing all policyholders money. Insurers operate a pooling system of premiums, whereby all the money that goes in, is used to compensate those that suffer a loss.

There is a direct correlation between the amounts paid out and premiums paid. Basically more claims = higher premiums. As an individual, is easy to take a parochial view on this matter, many simply do not realise that added all together, the sheer amount of fraudulent or exaggerated claims, cost the UK insurance industry a great deal of money. According to the Association of British Insurers, crime adds an extra £44 to the average UK household’s annual insurance bill with 335 fraudulent claims a day being uncovered worth
£2.3 million pounds.

One of the principles of insurance is known as indemnity. This principle seeks to place a policyholder in the same financial position after a loss as he or she was before the loss occurred. It is not intended to see a policyholder make a profit from a claim You could argue that some home insurance polices ignore this principle by settling claims on a new for old basis, but to receive this cover in the first place you have to have valued your contents as new.

Whilst the majority of people do realise that insurance fraud is a crime, a worrying number of people are prepared to take a risk and make false claims. There are a number of outcomes that could befall the fraudulent claimer: the insurance company will probably refuse to pay any claim at all, even if any part is genuine and they may, at there discretion, notify the police if they feel the crime is serious enough. They will most certainly place the persons details on to a central database, that all other insurance companies have access to, this will alert insurers to the fact that a fraudulent claim has been made and the person, may find it very difficult to obtain further insurance cover. This can have very serious ramifications, particularly, if you need to effect insurance for legal reasons, such as motor insurance or to satisfy say a condition of a mortgage, in the case of home building insurance.

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