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Are Increased Measures Needed to Combat Insurance Fraud?

Wednesday, 19 November 2014

Insurance fraud is a phenomenon that has bedevilled the insurance industry for ages and continues to engage practitioners, law enforcement and other industry players. There are various types of fraud but one or two have been particularly prevalent recently.

Typically, the majority of insurance frauds occur when claimants makes claims for personal injury or damage to a vehicle. In reality many motor claims incidents are premeditated and therefore not purely accidental. Numerous commentators, particularly in the mainstream media, succinctly refer to this practice as ‘crash-for-cash’. A disturbing development in 'cash for crash' claims has been where a driver deliberately brakes causing the car behind to crash into the rear.

Another type of insurance fraud is the attempt to obtain cheaper cover through misrepresentation of personal circumstances such as past convictions. Accordingly, there has been an active campaign to nip this fraud in the bud. As recently as September 2014, police arrested 11 people across the UK on suspicion of false personal injury claims following referrals from insurers and the Insurance Fraud Bureau.

Insurance Fraud Clampdown Benefiting Insurers and Policyholders

The successful clampdown on fraudsters is expected to benefit insurers and legitimate policyholders through lower premiums. Figures from 2013 marked a period of falling costs for car insurance; average annual comprehensive insurance quotes fell by 9.8% when compared with 2012.

This development was synonymous with research findings that third party, fire and theft quotes also fell within the period. Insurance industry experts attributed the dip partly to clampdowns on fraud and also restrictions on claims management companies. Indeed, the British Automobile Association (AA) sees controlling personal injury claims as the key to keeping premiums low. Arguably though, other contributory factors also had an influence including changes in the law and growing competition among insurers.

Recent Insurance Premiums Bucking the Trend

The, latest figures per the AA index reveal a rise in insurance premiums for the first time in two years, with premiums across the whole market up by around 4.2 per cent. This is against the weight of expectation that premiums would continue to fall due to the insurance fraud clampdown. Consequently, Janet Connor, managing director of AA Insurance believes the industry may have missed the opportunity to stem the tide of fraudulent claims.

Can More be Done to Help Insurers Reduce Premiums?

There are a number of ways to tackle insurance fraud which have been gaining traction in the industry. Experts have identified an industry shift from the traditional ‘shallow’ to a ‘deeper’ form of policing which sees greater focus upon criminal and quasi-criminal outcomes.

Deeper policing of insurance claims goes further to widen the net whereby more dishonest claimants are made to face the criminal and quasi-criminal judicial system. The expectation is that the industry can develop to deal more effectively with insurance frauds such as crash-for-cash over time.


For specialist advice regarding making or defending insurance claims please contact Peter Gourri today by email or telephone 0207 611 4848.

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