Insurers blocking £1m of fraudulent claims a day!

The Association of British Insurers (ABI) said its members detected and prevented fraudulent claims worth £480 million during 2006. The group said this was three times the amount discovered in 2003, due to a combination of both rising fraud levels and improved detection rates.

It said insurers were now detecting fraud at a faster rate than it was increasing due to a number of industry initiatives, including greater use of industry databases and the setting up of the Insurance Fraud Bureau last year.

However, despite the progress in detecting fraud the ABI estimated that fraudulent claims still cost the industry £1.6 billion a year and added around £40 to the cost of annual premiums for policyholders.

One in every 11 insurance claims was believed to be fraudulent in some way. The most common type of fraud was for policyholders to exaggerate the value of a loss for a genuine claim, with this happening in 85% of all cases.

Other instances of fraud included deliberately damaging something and claiming it was accidental, and people intentionally burning out cars and claiming they were stolen. Nearly half of all fraud occurred on household insurance policies.

Exaggerated injuries

Among the fraudulent cases uncovered by insurers was that of an amateur footballer who claimed he was unable to return to work following a back injury.

His fraud was exposed when a local newspaper ran a story with his picture after he was named as player of the year at his local football club.

In another case a policyholder pushed his car over a cliff and then claimed it had been stolen so he could use the money to repay his debts. The ABI claimed people with an unsecured debt above £1,000 were two times more likely to have committed insurance fraud.

One woman reported her husband for exaggerating injuries he received in a car accident after he left her having collected a £385,000 compensation payout!

Nick Starling, director of general insurance and health at the ABI, said: "The industry is fighting back. Insurance cheats are more likely to be caught than ever before.

"And cheats will pay a high price as future insurance and credit will be more expensive and harder to obtain."

The report - 'General Insurance Claims Fraud' - can be downloaded from the ABI's website - link above/right.