Fraudulent Insurance Claims on the Rise

The UK insurance industry has seen a significant increase in fraudulent insurance claims compared to pre-Covid levels. Aviva has recorded a 16% increase in fraudulent motor insurance policy claims compared to previous years, whilst Allianz Commercial also reported an 11.2% uptick in fraud claims in 2022 costing around £70.7 million, up from £7.1 million in 2021.

With the rising cost of living, many individuals and families struggling to make ends meet may be tempted to consider less legal means by making a fraudulent insurance claim as a way to obtain some extra money. This can be particularly true in relation to public liability incidents and personal injury claims where the claimant has experienced a genuine loss or accident but has exaggerated the extent of the damage or injury. This was most notable in the number of whiplash claims prior to the reforms implemented in 2021.

Motor, property, and casualty insurance have seen the greatest increase in detected fraud cases, including staged accidents/injuries, and false claims of theft or damage. but whilst there are indications of fraudsters moving away from traditional types of fraud such as “crash-for-cash” scams, there are worrying signs of more sophisticated fraud claims being attempted.

Types of Insurance Fraud

One such method, known as ‘application fraud’, occurs where a policyholder provides false information to purchase insurance. An example of this is where a motorist claims to be the main driver on their car insurance to obtain a more affordable premium for someone else, such as a parent ‘fronting’ a policy on their child’s behalf.

Another method of fraud occurs where fraudsters pretend to be insurance intermediaries to sell discounted policies that do not in fact exist. The victim believes they are paying a cheaper premium when in reality, the insurance is completely worthless, and can have severe repercussions, resulting in the victim paying more in fines and being liable for any damage caused whilst driving without valid insurance. So called ‘ghost-broking’ typically targets its victims under the pretence of offering a better deal, and in some cases can appear genuine, particularly if the ghost broker has purchased a policy from a legitimate provider using false information before doctoring it and selling it to the victim for a profit.

The true cost of Insurance Fraud

Regardless of the type of fraud being committed, the ones that end up suffering the most are the genuine consumers who face having to pay higher premiums as a result of a fraudulent claim. At a time where everyone is already facing higher living costs, it is crucial that firms remain vigilant to ensure their genuine customers are protected from harm. That includes responding to the levels of complexity and frequency of fraudulent claims with equal sophistication and mitigation.