Insurance Fraud Boosts as Recession Hits
The Association of British Insurers (ABI) has recently reported that due to the financial downturn, car insurance and home insurance fraud has increase by 17%.
ABI director Nick Starling said: "Fraud thrives in a recession, so insurers are intensifying their crackdown on insurance cheats."
A recent survey revealed that 4.7 million Brits did not think it wrong to file a fraudulent claim. The research, carried by UK's largest commercial insurer RSA, revealed that this figure is 1.1 million higher than last year.
Aviva, Britain's largest household insurer said that the cases of insurance fraud have raised an tenth so far this year, mainly because of the recession.
Andrew Buck, Aviva's claims fraud manager, speculated that the rise in claims is related to the recession. "We cannot say how much of this is solely down to the economic climate," Buck said. "Clearly when times are tougher, crime increases."
But they are not alone. Price comparison website Confused.com, which is run by the insurer firm Admiral, has become the latest group to warn that it had seen a marked increase in fraudulent claims, including ones by criminal gangs, in the first half of the year 2009.
According to their chief operating officer, David Stevens, they have so far identified fraud and avoid paying out in claims worth 2 to 3 per cent of the £404.6 million in premiums that it had written. Some fraud would not be detected and therefore, fake claims are likely to represent about 4 to 5 per cent of all written premiums.
Admiral, which specialises in UK car insurance, have discovered among other scams inflated car-repair bills, clients lying about how many passengers they had in their vehicles at the time of an accident or a motorist reporting his car stolen after pushing it over a cliff.
The home-insurance sector produced the most claims - 55,000, worth £110 million, but motor claims were of a far higher value - £360 million from 35,300 cases.
It is estimated that £1.9 billion in fraudulent general insurance claims go undetected each year. The claims, which include clients lying about their past to try to cut the cost of policies, adds an extra £40 a year to the average premium that the honest customer has to pay.
In contrast Admiral’s first-half pre-tax profits rose by 5 per cent to £105.3 million, after a 19 per cent increase in group revenues to £243.1 million. Profits from its UK car insurance operations rose 18 per cent to £101.2 million.
Henry Engelhardt, the founder and chief executive of Admiral, which owns 15.22 per cent of the company will bank £11.2 million, and recently the company has handed its 3,000 staff shares worth £1,500 each, worth a total of £4.5 million.
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