Sun, sea... and scams

Two friends get off the same plane. One picks up all the luggage and takes it through customs. Once safely through, the other reports his luggage lost. He can prove that his luggage was checked in, and now it is nowhere to be found. He claims compensation from the airline, or failing that, his travel insurer.

This is just one of the inventive frauds currently faced by travel insurers. A third of all claims on travel insurance policies are reckoned to be at least partly false, and the insurance industry says that the pounds 50m of claims estimated to be bogus every year push up the price of travel insurance by around 10 per cent for all holidaymakers.

Of all the different types of insurance, travel insurance sees the highest proportion of fraudulent claims. Most of them involve inflating the value of possessions and money that have been lost or stolen - often as a way of covering the excess on the policy or simply recouping the cost of the insurance.

"Cheating the insurer is perceived to be fair game," says Sarah Joannides of Home & Overseas, the UK's biggest travel insurer and the company behind a number of the policies sold by high street travel agents and banks.

Last week the Association of British Insurers (ABI) warned that in some cases fictitious or even inflated claims could result in prosecution and a criminal record. The perpetrator could also face difficulties in getting insurance in the future. "It's not worth getting a criminal record for the sake of a pounds 150 camera," said an ABI spokesperson. Some insurers, however, say that in practice fraudsters are unlikely to face prosecution except in cases involving claims for many thousands of pounds.

Insurers claim to be alert to fraud and to be using increasingly sophisticated techniques to catch out the fraudsters. They are accustomed to receiving inflated claims involving the alleged theft or loss of video camcorders, expensive cameras, Rolex watches and designer sunglasses or clothes. Some say that in cases where they suspect that a claim is inflated, simply "putting it back in the claimant's court" by seeking more information will see off the fraudster.

Many will demand original receipts and documentation rather than photocopies, because they can detect tampering by using infra-red technology. Some will use local agents or even Interpol to check the existence of medical establishments in the name of which bills are issued. Insurers name India, Pakistan and Thailand as being common sources of counterfeit police reports and receipts. Access to personal computers has also led to an escalation of frauds involving fake bills and reports. Some insurers insist they will contest claims for recently purchased valuables where receipts or other proof of ownership cannot be produced.

Claims for medical treatment that someone never received are common frauds, while cases of people travelling overseas with the express purpose of benefiting from treatment have also been uncovered by reference to medical histories in the UK (pre-existing conditions are normally excluded from policies).

Making more than one claim for one loss is also common, and is said to be more easily picked up these days by computer cross-checking within companies and by sharing of information between insurers. Insurers say they look out for variations in names and addresses for payment.

Claiming twice for the same loss, even if you have two insurance policies, is not permitted. Underlying this rule is the idea that it would encourage people to be irresponsible, knowing that they stood to profit from any claim.

Meanwhile, some foreign police forces are becoming less gullible. Fed up with having to produce reports for items allegedly lost or stolen, they are now challenging people. The ABI reports a recent case where police visited a man in his hotel room after he reported the loss of a video camera. They found both him and the "missing" camera in the room.