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Record numbers of recession-hit householders are making fraudulent insurance claims, the Association of British Insurers (ABI) said today.

Figures for last year show that slightly more than 100,000 fraudulent claims were detected – a rise of 17% on 2007. The value of the claims was 30% higher than the previous year at £730m.

"Fraud thrives in a recession," said Nick Starling, the ABI's director of general insurance. "But cheating on your insurance really does not pay. The only thing you are likely to gain is a criminal record."

Dishonest home insurance claims were the most common types of fraud, the figures show, with 55,000 detected in 2008. By value, motor insurance claims were higher, totalling £360m.

In a separate survey carried out by YouGov for the ABI, one in five people said they would not rule out making a fraudulent claim in the future. This increased acceptance of insurance fraud as a way to make money was highlighted by separate research from Royal & Sun Alliance in January.

According to its survey, 1.4 million people consider insurance fraud more acceptable now than they did a year ago. That amounts to a total of almost 5 million people who do not think making a false claim is wrong.

Typical examples of insurance fraud include failing to disclose motoring convictions or previous claims when applying for cover, and exaggerating claims by adding extra items to a genuine claim. More drastic examples include people hiding their valuables and staging a burglary in an attempt to claim thousands on their insurance policies, or dropping their old television down the stairs so they can claim for a new flat-screen model.

The ABI estimated that fraud adds an extra £40 a year to the average insurance premium. "The harder we make it for the cheats, the more competitive premiums will be for honest customers," Starling said.

Insurance cheats caught out last year

• A policyholder claimed his car had been stolen following a mugging. Investigations revealed he had actually sold it to a friend.

• A woman claimed for a lost engagement ring, but was told her policy did not cover her outside the home. She then extended the cover and the next day claimed for the loss of the same ring.

• A man claimed "recovery expenses" following an illness while holidaying in West Africa. These were declined as they were for "services" at a local brothel.

Source: Guardian

Zurich cracks down on motor fraudsters with new UK-wide fraud initiative

Zurich has announced it's piloting a new initiative intended to expand its current work on reducing motor claims fraud. Zurich has set-up additional bespoke, motor claims investigation teams whose sole purpose will be the detection and investigation of motor claims fraud. The initiative will enable existing claims teams to focus on delivering good quality claims service and it will also generate significant cost savings to the business.

This exercise is intended to broaden the insurer's current claims investigation activities in this area and introduce one consistent approach across all motor claims teams in the UK.  The pilot is geared up to handle issues such as staged accidents as well as more opportunistic types of motor claims fraud. It will also create a team of motor fraud specialists amongst existing teams, who will focus 100% of their time on eliminating fraud, as opposed to juggling fraud detection with their day-to-day claims handling responsibilities.

Techniques used by the new teams will revolve largely around existing proven methods, including field and desk-top investigations, cognitive interview techniques, links with intelligence sources/ specialist external partners. A system of fraud indicators will help the identification and referral of suspected fraud claims to the relevant motor claims investigation representative.

Those taking up new roles in the team have been through intensive training programs to supplement their previous fraud training as motor claims handlers. This has been complemented by wide-scale fraud awareness training amongst the claims teams to help them identify the tell-tale signs of a suspected fraud claim. Industry databases are also being used to help investigate previous claims experience and incidences of fraudulent claims activity.

Scott Clayton, Claims Fraud and Investigations Manager said "The main objective of this scheme is to ensure we enable the teams to focus solely on the elimination of fraud.The Insurance Fraud Bureau (IFB) findings show that approximately 22,500 staged and induced motor accidents have taken place across the country since 1999 - this figure has increased year-on-year during that period.  These findings also report that fraudsters can make approximately £30k for each successful scam - a very lucrative sum.

Tony Emms, Motor Claims Director at Zurich said "By making it more difficult for individuals to commit fraud, we hope these new teams will act as a deterrent to 'would-be' criminals and reduce the extra 5% premium paid charged to honest customers to meet the cost of fraudulent claims."

Fraud: Scams often involve groups of unscrupulous drivers agreeing to stage 'cash for crash' accidents and then splitting the proceeds of any payout Simon Douglas, director of AA Insurance, said: 'I won't be surprised if, by the end of 2010, we'll have witnessed an unprecedented 50 per cent rise in just two years.' It is a harsh blow for motorists who are already under pressure from the rising prices of petrol and second-hand cars.

The report comes in the week the association of British Insurers is expected to reveal that the industry detected 33,000 fraudulent motor insurance claims last year, compared with 28,000 in the previous year. However, tens of thousands more claims are not picked up. One of the most common frauds involves personal injury claims, such as inventing whiplash injuries or exaggerating the effect of a minor accident. 'Cash for crash' frauds include the 'slam on' scam where a driver brakes suddenly at a roundabout or junction, causing the innocent driver behind to crash into the vehicle.

In many cases, the first car is filled with passengers, who all claim for exaggerated whiplash injuries, and the fraudsters also claim for the cost of repair or replacement of their vehicle on the innocent driver's insurance. Other motorists who have genuinely been involved in an accident are being encouraged to submit inflated claims by lawyers whose hefty bills make the insurance industry's costs even higher. The AA fears many motorists will simply stop paying for insurance because they cannot afford it. Already around one million do not have insurance, which is thought to cost insurers around £500million a year.