ABI Says Authorities Expose $6.55 Million a Week in U.K. Insurance Fraud

March 24, 2005

According to figures recently issued Association of British Insurers (ABI), the “net is tightening” on the U.K.’s insurance cheats. The figures show a “dramatic rise in the value of fraudulent insurance claims being detected by insurers, with dishonest claims totaling over £3.5 million [$6.55 million] a week now being exposed.”

The ABI said the “frauds uncovered range from deliberately smashed TVs, invented burglaries, and faked personal injuries to highly organised scams.” A survey by the ABI of insurers who cover two-thirds of the general insurance market showed that fraudulent claims valued at £200million ($374.3 million) were uncovered in 2004. “This 95 percent rise on 2002 reflects increased resources, new fraud detection techniques and sharing of information between insurers.”

The report gave the following examples of “Insurance cheats exposed:”
– A claim for a damaged carpet caused by ‘accidental’ spillage of paint was rejected when forensic tests showed it had been deliberately applied.
– Following a claim for a burglary, the ‘stolen’ items were discovered being stored in the claimant’s loft.
– A man claiming to be unable to walk due to a back injury was found out when a picture appeared in his local paper of him collecting an award for top goal scorer for his local football team.
– A woman reported her ‘crippled’ husband for exaggerating his injuries in a car accident after he walked out on her.

“Contrary to what some people think, insurers are no soft targets for fraudsters, and that is good news for honest policyholders”, stated Chris Hannant, the ABI’s Head of Financial Crime Prevention. “Protecting honest policyholders from the dishonest minority is a priority for the insurance industry. As well as weeding out the opportunistic cheats, the industry is also tackling the more organised frauds. Insurance cheats not only face the increasing risk of getting a criminal record, but will find future insurance and credit much more expensive and harder to obtain.”

The ABI noted that among the most common frauds being detected are the following:
– Staged motor accidents. These involve criminal gangs deliberately staging motor accidents with innocent motorists, then claiming for damage to the vehicle and whiplash neck injuries, backed up by witnesses, who turn out to be part of the scam.
– Personal injury claims against local authorities alleged to have been caused by tripping over paving stones, which were actually sustained in unrelated incidents.

The ABI said: “While it is becoming increasingly difficult to get away with insurance fraud, the industry continues to develop initiatives to stay ahead of the fraudsters. For example:
– The ABI ‘Cheat line’ offers a free confidential service to enable people to report suspected or known insurance fraud. It plays an important part in identifying fraud, and has led to criminal prosecutions and recovery of funds.
– The development of a database, which enables insurers to quickly spot potential fraud from information held across multiple insurers.”

Ed note: Perhaps as a result of globalization, or more likely due to the historically close ties and parallel legal systems in Britain and the U.S., most of these scams, and the efforts needed to combat them, are all too familiar to U.S. insurers.

£1 = $1.8714

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