Insurance Fraud Does Not Pay

Insurance fraudsters beware! The insurance industry is fighting back on insurance fraud, to prevent negative impacts on the insurance premiums of the “honest majority”.

Insurance fraud takes different forms. One is lying to an insurer when first taking out a policy, or deliberately concealing facts that would otherwise lead the insurer to charge a higher premium or not offer cover for the risk.

Another relates to fabricating or augmenting claims. This could be by deliberately manufacturing a claim scenario, or by telling lies about losses incurred. Crash for cash is one example. Here, drivers deliberately cause a crash, so as to then make an inflated insurance claim.

Other examples of fraud include bogus whiplash claims, or deliberately causing damage that leads to a household claim. It could equally be alleging you have lost a designer watch you never actually owned. Targeting an insurance payout through deliberate arson is another very serious fraud.

The mission to crack down on insurance fraud is spearheaded by two entities. The first is the Insurance Fraud Bureau (IFB), a not-for-profit organisation founded by the Association of British Insurers (ABI) to lead the industry’s response to fraud and which operates the fraud reporting hotline, Cheatline. The second is the Insurance Fraud Enforcement Department, a specialist police unit funded by the ABI and Lloyd’s of London.

Another major and robust tool in the armoury,  however, is the Insurance Fraud Register. Launched in 2013, this industrywide database of known insurance, fraudsters is available to 

over 300 insurer members and already covers 80% of the general insurance market by market share. 

Using advanced software, these authorities have many opportunities to detect, disrupt and prosecute anyone fabricating an insurance claim or lying to insurers. In 2020 unauthorised financial fraud losses across payment cards, remote banking and cheques totalled £783.8 million in 2020, a decrease of five per cent compared to 2019. Banks and card companies prevented £1.6 billion in unauthorised fraud in 2020. This represents incidents that were detected and prevented by firms and is equivalent to £6.73 in every £10 of attempted fraud being stopped. In addition to this, UK Finance members reported 149,946 incidents of Authorised Push Payment (APP) scams in 2020 with gross losses of £479 million.

Detection in Practice

One recently detected insurance fraud case involving the defrauding of two different insurers. Following a traffic collision, the claimant made personal injury claims under both their former name and a new surname adopted through deed poll, claiming as both the car’s driver and a

supposed passenger.

Having received payment, the fraudulent claimant then failed to declare either their criminal record or true claims history when taking out another car insurance policy with another insurer. They claimed for damage to their £290,000 Lamborghini Aventador in a car park and received nearly £45,000 for repairs and £5000 for car hire. Five months later, they submitted a similar claim for damage suffered in a car park, which triggered an investigation that uncovered the criminal record and multiple claims made under two different names. 

Information shared between the two insurers red-flagged fraud against both. IFED officers suggested the insurers had been defrauded to the tune of £60,000 and a court sentenced the claimant to 22 months in prison, suspended for 18 months and 200 hours of unpaid work, as well as ordered a compensation payment of £58,000 to the affected insurers.

The Penalties 

Committing insurance fraud is simply not worth the risk. You could be prosecuted and acquire a criminal record. 

Defrauding an insurer, in any way, will make it difficult to find future insurance cover and, if you are a business owner, this may leave you unable to trade. Access to other financial products and credit could also become problematic.

Should an insurer believe you deliberately withheld information and key facts at the policy inception stage, they can deny any later claim. If your inaccurate presentation of the facts relates to the policy’s sum insured, they could only pay a proportionate percentage of the claim, in line with the degree to which you were underinsured. This can leave you with a financial shortfall.

Given all of the ramifications of being found guilty of insurance fraud, it is a crime that really does not pay. The chances of getting away with it are slim, so ensure you provide honest assessments when claiming and make sure you give your broker all the facts the law expects you to disclose when first taking out cover.

Call us today on 01274 515 747 or email us at mail@lwood.co.uk to find out how we can help.