Brian Sims

“Average for fraudulent insurance claims rises to £12,000” reports ABI

IN THE face of the unprecedented challenges of the pandemic, insurers have continued to thwart insurance cheats to protect honest customers. Despite a fall in the overall number of insurance frauds detected in 2020, mainly due to fewer motor insurance claims, both the value of the average fraud and fraud detection rates increased in comparison with 2019. This demonstrates how well insurers’ fraud investigation teams have adapted to working remotely.

The Association of British Insurers’ (ABI) latest detected general insurance fraud figures highlight that, in 2020, the number of detected fraudulent claims fell to 96,000 (down 10% on 2019 to hit the lowest level since 2007). Their value, at £1.1 billion, also fell on the previous year, but at a lower rate of 4%. This resulted in a rise in the value of the average fraud detected to £12,000, which is up 6% on 2019.

Fraud detection rates rose, both by number (up 0.02 percentage points) and by overall value (up 0.47 percentage points). This shows the level of detected fraud measured against all claims made.

Insurers detected proportionately more motor insurance fraud than in 2019, despite a fall in the overall number of motor insurance claims due to fewer vehicles on the roads during lockdowns. Detected motor frauds fell by 6% to 55,000, while their value dropped by only 1% to £602 million. However, detection rates rose by number (up 0.55 percentage points to 2.05%) and by value (up 1.31 percentage points to 6%).

The number of property insurance frauds fell by 10% to 24,000, with their value (at £111 million) down 9%.

With fewer businesses open and people making fewer journeys during the lockdowns, the number of liability insurance frauds (at 14,300) were down 18%, with their value (at £412 million) down 6 %.

Reflecting much reduced overseas travel, detected travel insurance frauds dipped. There were 770 detected scams. That number’s down by 49%. However, their value, at £1.8 million, showed a 2% increase. This led to the highest-ever recorded average claims value of £2,358. During the pandemic, travel claims focused on cancellation and curtailment.

Adapted quickly

Mark Allen, the ABI’s chief fraud and financial crime officer, said: “Insurers adapted very quickly to the unprecedented challenges of the pandemic in order to protect and support their honest customers through the most difficult of times.”

He continued: “Reflecting significantly fewer motor insurance claims last year during the lockdowns, it’s no surprise to see a fall in detected frauds last year. Also having an impact have been the various support schemes from the Government to help individuals and firms cope with the financial hardship which can ordinarily lead to increased insurance fraud.”

Further, Allen observed: “The rise in fraud detection rates shows that, however difficult the circumstances, insurers will continue to do all they can to crack down on fraud and protect their honest customers. As ’the new normal’ kicks in, the industry will remain vigilant against the fraud threat.”

Ben Fletcher, director of the Insurance Fraud Bureau, noted: “The pandemic has brought unprecedented challenges for the counter-fraud sector, but thanks to the industry’s collaborative efforts, insurance fraud has been prevented from rising as much as first predicted.”

Fletcher went on to comment: “While we welcome this good news, we must not be complacent. The disruption caused by COVID means that many people continue to face economic hardship. Sadly, this provides fertile ground for fraud. Not only does insurance fraud push up everyone else’s premium costs, but some scams such as deliberately caused collisions can put innocent people at serious risk of harm.”

He also explained: “In these challenging times, it’s essential that members of the public continue to be vigilant and report evidence of insurance scams to our confidential Cheatline so that we can work with the police service to keep fraud episodes down and protect consumers.”

Collaboration is critical

Detective Chief Inspector Edelle Michaels, head of the City of London Police’s Insurance Fraud Enforcement Department, informed Security Matters: “The COVID-19 pandemic reminded us how crucial collaboration across the industry and with law enforcement is in stopping insurance fraud. It’s promising to see that the rate of frauds detected by insurers increased last year, demonstrating the industry’s resilience in protecting its customers. We worked hard to act upon these detections, with the number of arrests executed by the Insurance Fraud Enforcement Department more than doubling last year in comparison to 2019.”

In conclusion, Michaels said: “We are pleased that, in spite of a number of court cases being postponed because of COVID-19, a number of audacious fraudsters were brought to justice last year following investigations conducted by ourselves that were supported by the industry. Hopefully, these results will act as a deterrent to any would-be criminals as life begins to return to normal and more opportunities to commit insurance fraud arise.”

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