News: Costa del cover fraud put at £50m a year as tourists bump up claims

Insurers hit; landline providers under fire; investors' fees rise; DTI won't bend on plastic
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The Independent Online

One in five holidaymakers who claimed on their travel insurance policy last year fraudulently boosted their application, according to research from the insurer Direct Line.

A lost or smashed camera was the most common false claim made, followed by jewellery, clothing and iPods. More than 10 per cent of the fraud was committed by holidaymakers knowingly inflating a genuine claim, often by as much as £100, Direct Line reported.

While receipts showing proof of purchase are usually requested by insurance companies when a claim is made, many policyholders get round this by pretending to have lost the relevant paperwork.

Figures from the Association of British Insurers show that fraudulent claims cost insurers at least £50m a year. This expense is usually borne by the consumer, in the form of an increase in premiums.

Slammers in the dock

The telecoms regulator, Ofcom, will soon be able to fine companies guilty of "slamming" - switching a consumer's telephone landline provider without his knowledge or consent.

From 26 May, Ofcom will have the power to punish phone companies that mis-sell a fixed-line deal through aggressive marketing.

Typically, the innocent customer is contacted by a rival landline provider but does not give permission for a switch. Days later, he discovers his account has been changed - or slammed - to a different supplier. The new phone company banks on the customer not bothering to change back or giving up his attempts to do so once time has passed.

Under the new regulations, all fixed-line telecoms suppliers will have to abide by a code of practice for at least two years. If rogue marketing has fallen away by then, an Ofcom spokesman says, the code may be dropped.

Companies found guilty of slamming could face fines of up to 10 per cent of their turnover.

Fund charges hiked

Investors in popular UK funds are to be hit with higher annual charges in the coming weeks.

From tomorrow, Credit Suisse is to raise the annual management charge (AMC) on its Income and Monthly Income funds from 1.2 to 1.5 per cent.

Based on current fund sizes, the independent financial adviser Bestinvest calculates that investors will have to pay an extra £4.6m in charges.

Similarly, Threadneedle is to raise the AMC from 1.25 to 1.5 per cent on its UK Monthly Income, UK Growth & Income and UK Equity Income funds from 15 June. Investors here will be left paying an extra £4m, according to Bestinvest.

While they may appear small, annual fees eat into investors' returns. A £7,000 investment in an equity fund charging an AMC of 1.25 per cent, which grows by 7 per cent annually for 10 years, will be worth £244 more than the same investment made with a rival charging 1.5 per cent. Over 20 years, this difference will be £890, and over 30 years, it rises to a staggering £2,350.

The two fund managers are, to some extent, playing catch-up, since their rivals already typically charge 1.5 per cent. But given the plummeting stock markets of recent years - leading to a lack of confidence in equity funds among the investing public - their move makes no sense, says Stephen Marriott, fund analyst at Bestinvest.

"You might think that falling fund sales [among consumers] might push fund groups to take a more innovative approach," he comments. "Instead, they've taken the short-sighted route of simply hiking fees."

Mr Marriott sees the latest rise in fees as another sign of how little regard the industry has for its customers.

Credit reform blocked

The Government has roundly rejected reforms proposed by the Treasury Select Committee's inquiry into credit card charges and marketing.

The committee had called for greater transparency, with interest on the cards calculated using a standard formula. However, the Department of Trade and Industry (DTI) has decided not to implement the recommendations.

Today, there are 10 different ways to calculate interest. This means that an advertised annual percentage rate (APR) of 14.9 can actually be cheaper than a rival deal of 11.

"Standardisation would restrict or eliminate consumer choice," rather than boost competition, the DTI said in a written response to the committee.

Lenders successfully argued that being forced to adopt a single interest calculation would stifle their ability to provide a range of deals for consumers.

But the consumer body Which? expressed its disappointment at the DTI's failure to act, arguing that consumers would still be in the dark over the true cost of borrowing.

The DTI was also circumspect about the committee's calls for more data sharing between lenders. It warned that lenders would need to "carefully consider" data to ensure that individuals' credit ratings did not suffer unjustly.

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