From automotive and home, to small business and liability, fraudulent insurance claims have been on the rise in the UK as the country continues to recover from the coronavirus pandemic and the cost-of-living crisis.
According to a recent survey by FRISS, 20% of claims filed in 2022 so far have been thought to contain fraudulent information, an increase of 18% compared to their previous survey from 2020.
In fact, FRISS uncover through this research that whilst insurance professionals have always had their suspicion about fraudulent claims, but they saw a significant increase in the later days of COVID-19, claiming that this is because fraudsters had no choice but to become ‘more creative.’
In support, Triple-I comment on this directly in the report, saying that “unfortunately, the acceleration of digital processes that began well before the pandemic also provides opportunities for fraud.”
And yet, where FRISS survey respondents highlighted that fraud detection software services have proven to be highly effective overall, including improving loss ratio by 59%, staying ahead of developing fraud schemes by 53%, and increasing investigator efficiency by 52%, insurance fraud still costs consumers and claims handlers a fortune in unnecessary and unlawful costs.
What Insurance Fraud Costs the UK
For the UK, these fraudulent claims have increased by a staggering 13% compared to 2021, as reported by Aviva in their latest findings.
Their report on insurance claims fraud announces that they discovered over 11,000 instances of claims fraud last year alone, which equates to a total loss of over £122 million.
Impersonation Scams, Ghost Broking and Claims Intervention
Most UK households will be aware of a sudden spike in fake emails, text, WhatsApp messages and phone calls, asking directly for a money transfer. These impersonation scams comes in all shapes and sizes, from those pretending to be last mile delivery companies arranging new drop-off times, to family members claiming they have a new number, are in trouble and need funds to help them get out of it.
Similar to this is ghost broking, which is when an unauthorised person acts as an insurance intermediary. In the report, out of the 20,000 plus fraudulent automotive policy claims Aviva detected in 2021, ghost brokers accounted for 15% of them, and the Association of British Insurers (ABI) recently spoke of a ghost broker being caught recently, which involved a man being convicted of pocketing nearly £18,000 within 5 weeks of selling over 40 fraudulent automotive insurance policies.
As a result, banks, insurers and experts alike are often making their customers aware of this, advising them to be vigilant about unsolicited insurance offers from unusual and unverified sources. The Insurance Fraud Bureau (IFB) support this further, urging the public to report evidence of insurance scams to their confidential Cheatline so they’re able to liaise with the police to keep fraud down and protect consumers.
Most Common Fraudulent Insurance Claims
Out of all fraudulent insurance claims made, Aviva say that automotive fraud takes the number one spot for the biggest types of fraud committed, accounting for 60% of all claims fraud detected in 2021.
This was followed by fraudulent home insurance claims, which made up 13% of claims detected. And whilst this may seem like a minor statistics, it’s actually an increase of 45% in fake home insurance claims made in 2021, making it the biggest increase in 7 years.
The Cost-of-Living Crisis
According to the IFB, “the disruption caused by COVID means many people continue to face economic hardship which sadly 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.”
Aviva themselves also believe the pandemic and cost-of-living crisis play a major part, commenting that “fraud is typically committed for reasons of need or greed, and we believe the increase in claims fraud last year is linked to reduced incomes during Covid lockdowns. What’s more, as households and businesses come under increased financial stress due to the cost-of-living crisis, we expect to see more claims fraud, especially on home, small business and liability insurance policies.”
How ECSG Can Help
At ECSG, we are specialists in technical claims handling, and our ethos is completely aligned to protect our customers from the impact of fraud, uncover any foul play and ensure that only the most accurate claims are paid.
At ECSG, no stone is left unturned; we’re to support our clients from start to finish.
To find out more about our professional automotive claims handling platform, reach out today.