Fraud is most widespread with travel insurance. Insurers tell of the shocking, often bizarre lengths to which holidaymakers will go to claim. One family travelling in Spain recently put in a claim when one of the party, an elderly male relative, was "killed" after being hit by a taxi. The insurer's suspicions were alerted after the standard post-mortem revealed that rigor mortis had already set in before the injuries were received in the accident. Further investigation showed that the deceased had died of natural causes. To collect the pounds 25,000 insurance payment, his family had simply thrown the body into the path of an oncoming taxi, so it appeared he was killed in an accident. No money was paid.
Such extraordinary claims are rare, but much more common is simple inflation and exaggeration. Paul Patterson, claims manager for travel insurer WorldCover Direct, says: "Estimates indicate that 80 per cent of all travel claims are either fraudulent or inflated. From my experience I can believe it."
But insurers are hitting back. Richard Fowler, special investigations manager at Guardian Royal Exchange's fraud unit, says: "Insurers are taking fraud far more seriously these days. When the industry is profitable and enjoying good times, fraud does not seem an important issue. But once insurers hit hard times, fraud becomes a matter of grave concern."
Research has indicated that switching to telephone-based claims services has helped curb fraud. Colin Harris, customer services manager with Travellers' Insurance Association, a subsidiary of Commercial Union, says: "People are less likely to lie on the phone. They do not have time to prepare a story, and when put on the spot their version of events will have glaring inconsistencies, or they will simply fall back on the truth."
Claims staff are trained to spot inconsistencies, and any suspect claims are handed over to "fraudbusters". Most big insurers have their own fraud units, which often hire private detective agencies and surveillance firms to verify claims.
Don't be fooled into thinking that these agencies will only investigate claims worth thousands of pounds; insurers have been known to send round investigators over as little as pounds 200. Peter Taylor, a director of Farley Taylor Moore, insurance investigators, has been surprised at claims he has been hired for: "We have been called in to investigate a windscreen claim for pounds 100 on a motor policy."
Mr Taylor says insurers are wise to the fact that if policyholders get away with even a small exaggeration, they will try again for more money and may start on a "career path" of fraud. In the windscreen case it emerged that the policyholder, a professional man, had made a series of similar claims for windscreen repairs. Mr Taylor says: "When confronted with an investigator he immediately confessed to the fraud."
Companies like Farley Taylor Moore rely on the experience of their staff. Mr Taylor is an ex-CID officer with Greater Manchester Police and is skilled in interviewing and collecting evidence.
Derry Moore is a security consultant and private investigator with Cambrian Security Services. He says: "From the minute I walk through the front door of a suspect, I can tell if the claim is genuine or not."
However, gut instinct has to be backed by hard facts. Receipts, warranties, bank statements and even photographs are scrutinised to prove goods claimed for have been bought. Forensic equipment used in police work is used to check that bills have not been tampered with. Mr Moore says: "It is amazing how many people think they can get away with just adding a nought to the end of a receipt."
Investigators ask suspects to make a statement. Mr Moore says detectives will draw policyholders' attention to the fact that if their statement is proved false, they could be open to criminal proceedings. "Most people do not consider inflating an insurance claim to be a criminal offence. When this is put to them face-to-face a number will instantly withdraw the claim."
Often just visiting a claimant's house can show a claim is fraudulent. In one recent case investigators were surprised to find that a policyholder claiming for pounds 3,500 of designer suits lost at the airport lived in a squat with only orange crates for furniture.
Inevitably, genuine claimants may find themselves subject to some intrusive investigation. Mr Moore says that, on average, only 25 per cent of investigations end up with the police, and in the past four years this has only resulted in six people being brought to court.
Mr Taylor stresses that all investigations are carried out in a "polite and professional" manner. "Under normal circumstances there is no confrontation," he says.
But he admits that some genuine claimants can get angry and upset. "They have paid their premium and want their claim settled. Some do not understand why insurers have to investigate further."Reuse content