With Aviva recently reporting a 19% year on year increase in fraudulent claims, and motor fraud accounting for a large proportion of this, it is evident that many of us are unaware of the extent of this problem. It has been reported that £1 billion of fraud is detected by insurers each year, with a further estimated £2.1 billion going undetected.
There are many types of fraudulent motor claims which range from intentionally failing to disclose previous claims or convictions and exaggerated losses, to the organised ‘crash for cash’ schemes. It is clear that some people feel fraudulent motor claims is a ‘victimless crime’, however it has been shown to affect the honest majority through increased premiums. It is estimated that insurance fraud can add as much as £50 onto customer’s policies, and with the increased costs to insurers this figure is likely to rise.
This is an issue that has been evident for many years, however for many reasons which could include the rising cost of running a motor vehicle, the absence of effective deterrents, and the increasingly sophisticated fraud rings; this is an issue that has attracted much publicity in recent years.
In June of this year (2014) The House of Commons Transport Committee released a report titled ‘Driving premiums down: fraud and the cost of motor insurance’. In this paper the Transport Committee made multiple suggestions on how to address fraudulent behaviour including the need for better data on exaggerated and fraudulent claims. They claim that this would result in a better basis for policy decisions. It is also clear that there is a need for more easily accessible information for insurers to base their decisions at underwriting and claim stages.
The newly rolled out Insurance Fraud Register (IFR) is one of the most recent steps in the fight for the prevention of fraudulent claims. Developed by the Insurance Industry, and sponsored by the ABI, the IFR is a comprehensive database of known Insurance fraudsters. The IFR is currently available to over 300 ABI members and will act to deter fraudulent behaviour through easier identification of repeat offenders.
It is clear that the Insurance industry is taking progressive steps to tackle fraudulent claims; however there is still a long way to go. More accessible and better data will help insurers tackle repeat offenders, but with some considering fraudulent claims as a ‘victimless crime’ it is difficult to address the opportunist, and with the high returns for the organised criminal they will continue to develop more sophisticated methods to avoid detection.
By: Sam Crayk
Be sure to visit our Careers Page for the latest interim and permanent opportunities in Insurance.