Posted on Jan 07, 2011 by Sergio Ulloa
The UK insurance industry is being subjected to fraudulent claims costing companies a total of £2.3 million (US$3.6 million) every day. This position is highlighted in a recent report issued by the Association of British Insurers (ABI). It is estimated that an average of 335 fraudulent insurance claims are made by policyholders in the UK every day.
While insurers are becoming increasingly aware of the problem by adopting sophisticated techniques to detect fraudulent claims, in many cases fraudulent claims fail due to obviously conflicting information contained in the basic details supplied by claimants. Despite attempts by the insurance industry to crack-down on this type of fraud, it still results in claims amounting to around £2.3 million (US$3.6 million) daily. The two most common areas for fraudulent claims identified in the report are home and motor insurance.
Attempts to defraud mostly involves items covered under home insurance where an average of 170 false claims are made each day. Insurers report typical home insurance claims purporting to be due accidental damage to furniture and carpets, with claimants typically claiming that a split drink caused the damage when in fact insurers find the damage has been caused deliberately.
Insurers also identified bogus claims relating to motor insurance as being the second most common reason for false claims, with roughly 108 phony claims worth £1.1 million (US$1.7 million) each day.
Although insurers in the UK are using modern techniques to catch-out fraudulent claims, many people are found out due to senseless mistakes by the policyholder. As an example, one policyholder claimed for stolen DVDs under a home contents policy, confirming local purchase in the UK, although the DVDs had not been released for general sale in the UK.
Other examples highlighted, concerned a claim made by a policyholder for extensive damage to their car while parked in the UK, but it later emerged that the vehicle crashed in Germany when being used to race at the Nurburgring circuit and was shipped back to the UK for the claim to be made.
Insurers paid out £385,000 (US$600,000) for a claim made by a husband who sustained injuries from a car accident, but his wife subsequently reported him for exaggerating the extent of his injuries to the insurers after he left her. One claim was lodged by a man based on tripping on a broken paving stone in the street sustaining a head injury as a result of falling to the ground, but it was found that the head injury was caused as result of being hit with a baseball bat during a fight.
One of the most audacious fraudulent health insurance claims discovered by the ABI involved a man claiming for injuries sustained in an accident which rendered him unable to walk, but it subsequently come to light that the claim was false after his photo was published in a newspaper for being the top goal scorer for his local football team.
ABI's director of general insurance and health, Nick Starling, said: "The majority of customers are honest and rightly object to subsidizing the cheats. Insurance fraud adds an extra £44 (US$68) to the average UK household's annual insurance bill."
The Association of British Insurers has been collecting the data used in the report over the last 5 years. The ABI released the findings in December 2010 and now emphasizes that policyholders making fraudulent claims are likely to find themselves facing criminal action and will face problems in obtaining new insurance coverage in future.
UK insurers will continue with enhancements to detection measures in the battle to combat fraudulent claims in 2011, recognizing the need to protect honest customers and minimize costs.
The insurance industry in the UK plays a vital role in the UK's economy, being the third largest in the world and largest in Europe; it is a major exporter with a fifth of its net premium income being generated by business overseas and is a major employer with over 275,000 people working within the industry in the UK.
Trade Body Mentioned:
Association of British Insurers
The ABI (Association of British Insurers) represents the collective interests of the UK's insurance industry. The Association speaks out on issues of common interest; helps to inform and participate in debates on public policy issues; and also acts as an advocate for high standards of customer service in the insurance industry.