Insurance fraud pushes up premiums

Motorists who make fraudulent claims on their car insurance are causing providers to push their premiums up by an average of £40 a year, according to new intelligence from the Association of British Insurers (ABI).

One in ten adults (five million people) admitted to having cheated on a general insurance policy including car insurance, on a survey conducted by YouGov on behalf of the ABI.

The ABI estimates that fraud is costing the insurance industry over £4 million every day, but that honest customers are being forced to pick up the £1.6 billion annual tab through higher premiums.

“Honest customers should not have to pay for the cheats,” said Nick Starling, director of general insurance and health at ABI.

Car insurance companies employ a number of tactics such as accident inspectors and combination questions to investigate potentially fraudulent claims. The Aviva Group, which is made up of the RAC and Norwich Union among other insurers, goes as far as carrying out voice stress analysis to identify whether customers are telling the truth.

The ABI’s findings indicate however that current methods are proving quite ineffective against insurance fraud and that more must be done if fraudsters are to be dissuaded.

“Insurers are committed to reducing the fraud problem,” Mr Starling said.”We are devoting greater resources to weeding out the cheats and working together to detect and combat fraud.”

He explained how the Insurance Fraud Bureau (IFB), which was established in July last year to tackle organised insurance frauds, had already had a significant impact on the levels of organised fraud.

“These figures highlight that greater deterrents, such as criminal prosecutions, are needed to discourage fraud. This is why we are calling for police forces to be given more resources so that fraud can be treated with the seriousness it deserves,” he concluded.

Aron Thompson, head of insurance at independent price comparison service uSwitch.com, responded to the ABI’s findings: “Fraud is a huge issue within the car insurance industry and undoubtedly it does increase the cost of insurance premiums for honest individuals who have never made a fraudulent claim.”

He went on to say that it was “extremely alarming” how many customers were cheating on their insurance policies by making fraudulent claims.

Opportunity knocks

Mr Thompson explained that there are, generally speaking, two types of fraudster. The “well planned” fraudster takes out an insurance policy with the intention of ripping it off. However, the “if I can get away with it” fraudster could be an honest member of the community who exaggerates a claim but wouldn’t normally consider committing a crime.

Such opportunistic fraudsters might make inflate the value of a claim following a genuine accident, or include items in a theft claim that were not in the car.

The ABI survey revealed that almost half of the fraudulent claims were opportunistic in nature and were carried out by individual customers. It is estimated that opportunistic fraud currently costs over £800 million a year.

“If a consumer is convicted of fraud it will become very difficult to get car insurance in the future so making a fast buck could result in a lifetime of excessive insurance costs,” warned Mr Thompson.