Time To Out The Fraudsters
Bryan Banbury is Managing Director at Russell Scanlan, one of the UK’s largest independent Insurance Brokers and Risk Management firms. He has been reviewing reports from insurers which are spending increased time and money on tracing fraudulent claims and how the industry is moving to a zero tolerance position. With criminal prosecutions for insurance fraud on the rise as a result, he is calling for the industry to tackle wider awareness of an issue that can lead to rises in premiums for businesses and individuals.
Multiple industry reports are telling us that fraudulent insurance claims are on the rise right across the board. From opportunistic customers’ ‘exaggerating’ claims to planned deceptions that can cost insurers millions. The more bizarre and the strange cases are often widely reported in the press but what the industry and the government are doing to tackle this issue seems to attract far fewer column centimetres or broadcast seconds. A curious state of affairs given that the total cost of fraudulent claims could add as much as £90.00 to every individual’s annual insurance premiums.
What we really need to be communicating is that the insurance industry is getting wiser and smarter when identifying fraudsters and hefty criminal convictions are being handed out as a result. These cases are no longer considered soft crimes and instead the insurance industry is starting to play hardball.
And just to make a point … in 2013 insurers detected 118,500 bogus or exaggerated insurance claims which, quite phenomenally, work out at 2,279 a week. The Association of British Insurance (ABI) figures show that these claims uncovered by insurers hit a record £1.3 billion in 2013, up 18% on the previous year! Just to add some context, this figure is over double the cost of the UK’s shoplifting bill.1
Then when you take a look at other statistics the full extent of the problem becomes a little clearer. For example, Britain has a lower motor vehicle accident rate than the rest of Europe, yet it has a higher frequency of personal injury claims.
Crash-for-cash frauds, staged trips and falls, odd and planned accidents are often reported on as bizarre incidents and not examples of intolerable criminal behaviour. More oddly still there seems to be no focus on the victims of these crimes, often small businesses that can ill afford to deal with fraudster fall-out or insurers seen as just fair game.
But the tide is turning. The Insurance Task Force is a major new project backed by government and supported by the insurance industry associations. It is looking specifically at recommendations to tackle insurance fraud including household, travel and motor and review what gaps exist in fraud prevention and potential legal reform to fill those gaps. And criminal convictions are being pursued. Aiden Kerr, the ABI’s Assistant Director, Head of Fraud, says “The Message is clear: never has it been harder to get away with committing insurance fraud.” The Insurance Fraud Enforcement Department, a specialist police unit set up in 2011, has tackled 470 arrests and 85 prosecutions of insurance fraudsters to date.2.
Calls from the public reporting suspected insurance frauds into the Insurance Fraud Bureau’s Cheatline rose by 32% to 6060 in 2013 over the previous year. The Insurance Fraud Bureau (IFB), created in 2006 to specifically tackle organised cross industry motor insurance scams is currently supporting police forces and insurers investigate 110 ‘crash for cash’ scams, throughout the UK. These scams alone represent approximately £120 million of financial exposure to insurers.
So as an industry you can see that we are taking on the fraudsters and learning to deal with them. What we must must get better at is shouting about our successes and very publicly chalking up the years in clink. Take a look at these examples of where very audacious frauds were staged, and reported on but the consequences didn’t receive the same press attention.
Potholing for Pounds
One woman from Preston claimed that she had tripped and fallen in the forecourt of a small convenience store due to a pothole outside. The claimant sustained a fractured collarbone and injuries to her neck and shoulder, and the reserve on this claim stood at £26,000 including damages and costs. Now, in reality the claimant later admitted fraud as she actually fell over at home 15 miles away from the convenience store. Following an investigation the claimant in this case was given an 18 week custodial sentence (suspended for two years) and instructed to carry out 240 hours of community service.
Fraudulent motor insurance claims in 2013 were the most expensive and most common with an estimated 59,900 claims worth £811million. A gang of ten individuals aimed to defraud a Chester transport company, First Buses, in a million pound cash-for-crash scam. Cars and vans deliberately drove into the path of seven First Bus vehicles, all carrying passengers, over a 15 month period. Swift Accident Solutions represented all the claimants who were passengers that had sustained injuries as a result of these accidents. Following a full investigation, the owner of Swift Accident Solutions was found guilty of organising the multi-million pound cash-for-crash scam and was jailed for six-and-a-half years. 14 other co-conspirators also received sentences.3
And finally …
My advice to all my clients is be aware if there are areas of your business open to risk of fraud. The team at Russell Scanlan will always keep you appraised of any new legislation or other industry based changes but it may be appropriate for you to share a zero tolerance policy towards fraud with areas of your business.
If you are on the receiving end of a fraudulent claim, then share it with us as soon as you can. Delays can be costly and can affect the outcome of an investigation. We can help at every stage.
In the meantime we will lobby our industry, the insurance industry, to make sure that the message is heard and understood …. fraud really does not pay out.