Rising Insurance Fraud Equals Rising Costs

The cost of insurance fraud hit record levels in 2013 with £1.3bn in false claims being made according to the Association of British Insurers (ABI).

The most common type of fraudulent claims were related to motoring which made up a staggering £811m of the total. The number of fraudulent motoring claims came to nearly 60,000 individual cases, meaning tens of thousands of people either exaggerated or made up their claims entirely.

As well as being a criminal offence, insurance fraud imposes costs on both insurance firms and honest insured parties that suffer from increases in their premiums.

It is important to remember though that not all disputed insurance claims imply fraud, there are a variety of reasons that insurers and the insured might clash over payouts.

Headline Insurance Fraud Figures

The financial scale of insurance fraud went up considerably between 2012 and 2013 by around 18 per cent. As noted above, motoring claims were the primary driving force increasing in number and value by 34 per cent and 32 per cent respectively.

In broader terms, the overall number of fraudulent insurance claims fell, the number and value of false property claims in particular fell by around 38 per cent over that period.

Fraudulent insurance claims are being better detected every year; the Insurance Fraud Bureau which was set up in 2006 received a 32 per cent increase in reporting of fraudulent claims in 2013.

Insurance Disputes Not Necessarily Due to Fraudulent Claims

Individuals and businesses attempting to make legitimate claims sometimes find that the sums they hope to recover under their policy are reduced far below expectations or refused entirely by their insurer. This can be for a number of reasons and does not imply that the insurer suspects fraud.

Insurers may try to avoid policies, deny liability or dispute the amount claimed for commercial reasons or due to genuine uncertainties over a claim. In this case it is important that the insured seeks immediate legal advice as delays to payouts can entail significant hardship for individuals and businesses. Businesses in particular can suffer cash flow problems, operational issues and a variety of other difficulties if payouts are delayed or fail to compensate for their actual losses.

Areas that commonly lead to disputes between insurers and the insured include claims related to fire and flooding where damage and coverage must be assessed, claims for business interruption and claims where insurers refuse to make payouts for breaches of policy conditions.

Insurers or insured parties requiring specialist insurance litigation advice should contact Peter Gourri today by email PGourri@rollingsons.co.uk or telephone 0207 611 4848.