Crackdown ordered on insurance claim fiddles: The police may become involved when policyholders try to cheat

The police are increasingly likely to be brought in to investigate attempts to exaggerate insurance claims as companies get tough over rocketing payouts.

The Association of British Insurers has been running a campaign based on scare stories about the consequences for people who make fraudulent claims.

The reality until recently, however, has been that many insurers turned a blind eye to minor misdemeanours, simply refusing to provide further cover to a policyholder they suspect has 'tried it on'.

But over the past three months Legal & General, one of the country's largest insurers, has started to refer more cases to the police, even if the amounts involved are relatively small. Other companies are also toughening up.

Graham Morrison, claims manager at Legal & General, said this week: 'I have just looked at one claim from a couple where both were employed in good jobs. She is a personal assistant and he is a sales manager.

'They claimed more than pounds 500 to replace carpet which was damaged by bleach. We sent the cheque to the carpet supplier, who came back to us and said his invoice had only been for half that amount.

'We looked at the form and discovered that the policyholder had changed the figures on the estimate.'

Until recently the company would deal with this sort of case by simply refusing to continue providing cover. But now the case would be referred to the police.

It would be up to them to decide what to do, but Mr Morrison continued: 'We will write, drawing their attention to what has happened.

'We are prepared to put up with the extra work of referring cases involving small amounts.

'Fraudulent claims are increasing, and we are now seeing cases throughout the social spectrum.

'The people you meet at dinner parties may be the ones responsible for putting up insurance premiums.'

This hardening of attitude will provoke anger among honest policyholders who have found themselves arguing over the pounds and pennies in a claim.

But Mr Morrison insists: 'It is only in the case of the stupid claims where anyone has anything to worry about.'

Legal & General has also started using the latest technology to detect whether claim forms, valuations and other documents have been tampered with.

It now rents time on the Electro Static Detection Apparatus (Esda), the machine that played a pivotal part in examining police evidence in the Birmingham Six case.

There is also a machine that looks at writing under polarised light in infra-red and ultra-violet spectrum to produce a print of what was there before alteration and what the alteration was.

The company has given staff instructions on how to spot exaggerated claims.

One favourite method of bumping up claims, says Mr Morrison, is to add VAT on to a supplier's quotation when the supplier is not liable for VAT.

Some people are also adding items to genuine valuations - 'they will get a valuation for a ring and add on a bangle'.

The company is also becoming more vigilant in examinging applications for new policies, and is more likely than in the past to check up on an individual's track- record for claims.

General Accident says it is also tightening up and has been referring more claims to the police, although it insists: 'We take each one on its merits.'

It quoted the case of a claim for glass repairs where a receipt for pounds 40 of work was altered to pounds 1,400.

There was another where two stolen Rolex watches were claimed for. When the insurer checked with the jeweller purported to have provided the receipt, he said he had never sold Rolexes.

It will be increasingly necessary for people to keep receipts for valuable items in order to satisfy their insurers a claim is genuine.

Ian Frater, a spokesman for Commercial Union, says: 'We are getting better at spotting the fraudulent claims and noticing where documents have been tampered with.'

More claims are being settled by replacing the lost items rather than by paying cash. And the insurance company is more likely to check invoices and receipts with suppliers.

All insurers see a crackdown on fraud as vital to stemming claims. The ABI announced last month that theft claims reached pounds 2m a day in the first quarter of this year.

At the same time the association warned that the average family faced an increase in premiums of pounds 10 a month.

Insurers believe that as premiums rise, policyholders think they should get more back for the money they are spending.

Jim Smith, superintendent of home claims at General Accident, said: 'People are seeing their policies as a form of investment, and they want something back.'

Legal & General is among a number of companies examining the possibility of redesigning policies. It is think of building in large excesses so that people can only claim for large losses, and this would enable it to reduce premiums.

(Photograph omitted)