Why fraudulence begins at home

A new survey reveals that home-insurance fraud is on the increase - and so are measures to combat it

Apart from that long-promised visit to Aunt Joan and Uncle Harry in Dorset, the May bank holiday period also marks UK home surveys fortnight. It's probably because companies know that, stirred by serious bouts of spring-cleaning, our thoughts often drift to decorating, or upgrading that tired-looking sofa.

This year has been no exception, with a flurry of reports on homebuying habits, and cut-price mortgages. The most startling survey, however, was one by the Association of British Insurers which revealed that almost 50 per cent of us are potential claim fraudsters adding, somewhat eerily, "for some people the temptation to act dishonestly proves too much."

ABI's survey, which was based on the views of 2,000 consumers, says more than £1.2bn is lost each year from dishonest home and motor claims and that more than three million people are caught making one or more dishonest home-insurance claims. "The number of frauds is nearer 8.5 million, or 15 per cent of the population, as a lot of them are never traced," says Mark Jones, head of the anti-fraud department at UK insurer Direct Line. "These are worrying figures," says Malcolm Tarling of the ABI. "Ironically, the typical insurance fraudster has the same characteristics as the average insurer's best customer - middle-class, married, well-educated and comprehensively insured - apparently respectable people who see insurance claims as an easy way to raise some money."

Two of the fraudsters' favourite ruses are to claim a whole house needs re-carpeting after a guest or family member has accidentally spilt some paint or coffee on the living-room carpet, or to get a replacement furniture suite after a visitor has left a few marks on an armchair. In another instance, an unemployed holidaymaker who lost his suitcase claimed all his missing clothes had designer labels.

And some of the claimants' views quoted in the ABI survey are telling, to say the least. One says cheating your insurer is "similar to stealing towels from a hotel"; another that "everyone else does it, so why shouldn't I?".

So why do people pick on insurance companies to earn a dishonest penny or two? "It's a cultural thing - people see insurers as fair game," says Mark. "Some homeowners feel short-changed when, after paying years of insurance premiums, they have nothing to show for it, so they make an exaggerated insurance claim to get some of their money back," adds Malcolm.

But for every dubious claimant there are many genuine ones who may pay the price of their honesty. "The trouble with all forms of cheating is it makes it harder for the honest homeowner who may have to wait longer for his/her claim to be settled or face increased premiums when insurance companies need to recoup their losses," Malcolm says. But the insurers are fighting back. Some larger companies have teams of investigators who monitor applications and, if they see anything suspicious, follow it up. Direct Line says: "The number of fraudulent claims for home and motor insurance has risen in the past 12 months. Unlike most car and car-insurance crime, which is carried out by organised rings, the average home insurance fraud is made by an opportunistic individual who wants to replace old goods with new."

The ABI, too, is campaigning for a cleaner industry. It is developing an anti-fraud database for its 440 member-companies. This gives full details of homeowners, their past histories and any previous claims, including frauds. It is also working with the police, insurers and crime-fighting agencies on undercover devices to beat fraud.

Insuring your home for both buildings and contents is crucial - as the number of recent flooding cases has shown. As Brian Herriott of insurance brokers Friendly Life says: "One problem we face is that many people under-insure, failing to calculate the true value of their possessions to save themselves some money. It is vital that homeowners are fully insured so they don't face any problems when they make a claim."

Of the two types of home insurance, buildings - which is compulsory with all lenders - covers fire, accident and damage to your home's fabric, structure and permanent fixtures and fittings, while contents covers damage, loss or theft of possessions, furniture, loose fittings and even frozen food and drinks.

Happily, despite the rise in frauds and flood damage, insurers have kept rises in premiums on a par with or below inflation over the past 12 months. Average buildings insurance is now £141 a year, with a 2.3 per cent increase last year, while home insurance rose 2.1 per cent to a £114 per year, say new figures from the AA's Insurance Premium Index.