Half of all Britons willing to cheat on their insurance claims, survey shows

Policyholders are paying an increasingly higher price for the blatant dishonesty of a few, says Rachel Stevenson

Fraudsters are getting away with more than £1bn a year in fake claims on household and motor insurance policies, the Association of British Insurers (ABI) revealed this week.

Fraudsters are getting away with more than £1bn a year in fake claims on household and motor insurance policies, the Association of British Insurers (ABI) revealed this week.

Its research among 2,000 consumers showed there is little evidence of the problem abating, with 47 per cent of people admitting they would consider making a dishonest claim.

Insurers are forced to cover the cost of paying fraudulent claims by hiking up premiums for all policyholders. They are now warning customers they will not be duped and will make it more difficult for cheaters.

There are 70 million motor and household insurance policies in the UK, which means the cost of fraudulent claims is £14.20 per policy. Churchill Insurance, among the UK's largest insurance companies with seven million policyholders, yesterday said fraudulent claims added £30 to its average premium. It is investigating £10m worth of car insurance claims.

In the ABI's survey, 7 per cent of people admitted making a false claim and saw that on a par with stealing towels from a hotel. Nearly half, 47 per cent, would not rule out making a fraudulent claim, just above the temptation to knowingly buy stolen goods.

The ABI found 40 per cent of people think it acceptable to exaggerate a claim and 29 per cent think it is acceptable to make up a claim, the same number that think shoplifting is acceptable. One in four people said they would be tempted to use a stolen credit card. "People think insurance fraud is a victimless crime," the ABI's spokesman, Malcolm Tarling, says. "They cannot see someone at the end of the chain who is damaged by their actions or suffers in any way. But insurers have to fund the cost of fraud by putting up premiums for the other policyholders. Insurers agree most claims are genuine, but the dishonest few pump up the costs for everyone."

Five years ago, the ABI had reckoned fraud was costing between £750m and £800m a year. Now, premeditated fraud is increasing, including staged car accidents with vehicles bought for scrap. The fraudsters employ accomplices to act as "independent witnesses" to verify their claims.

But insurers are getting better at spotting fraudulent or exaggerated claims and work together to share claims information. "We were told of a case where a man had insured his car 10 times with different insurers, then claimed the car had been stolen from each insurer," Mr Tarling says. "But the claim was picked up on a database shared by all the insurers and he was caught out.

"We had a case where a man claimed £2,000 on his medical insurance for an emergency appendectomy that happened on holiday abroad. It turned out he had made similar claims on eight previous holidays with different insurers."

Insurers now employ specialist forensic experts to examine claim documents, and they have close links with the police to identify possible criminal activity. They can spot a forged document, such as a receipt that may have been doctored to bump up a stolen goods claim. The ABI secured a joint anti-fraud initiative with the police last year, making it easier for insurers to get information from officers when they suspect a claim is fraudulent. Insurers can also check police statements to cross-reference items listed as stolen in a burglary.

Liverpool Victoria Friendly Society employs 200 people to process claims, all of whom are trained to spot irregularities that might indicate fraud. Such cases are passed to specialist teams who use the resources of the police and other bodies to establish the authenticity of the claim. It is pursuing one fraudster for £18,000 in legal fees after proving in court that a claim for more than £40,000 was false.

"Most of our policyholders make genuine claims and it is our duty to pay them promptly," says Trevor Webb at Liverpool Victoria. "We have to balance how we treat our policyholders, whom our first instinct is always to trust. But we have to have a robust system in place so we are able to pick up a fraud." Lorraine Robson, an adviser at Towry Law Insurance Brokers, says online insurance policies and call centres have made customers feel more detached from their insurance company, which may increase the inclination to commit fraud.

"The wider the divide between insurer and client, the more likely it is the normally 'honest' client will feel a degree of detachment to such an extent that they feel no responsibility towards the provider," Ms Robson says. She points out that using an insurance broker can ensure a clear understanding of the policy cover, their responsibilities when entering into a contract of insurance and the responsibilities of their insurer to them.