Insurance fraud 'on the up'

21/04/2009

There has been a general rise in insurance fraud in the UK - with the recession a potential factor in the increase.

Analysis from industry group the Association of British Insurers (ABI) suggests that around £14 million of false claims were being made each week in 2008.

This equates to 2,000 separate incidents of people either inflating the amount of money they claim for or otherwise cheating.

In all, 107,000 fraud claims worth £730 million were exposed in 2008 - a 17 per cent and a 30 per cent increase over 2007's totals.

Over recent months, the economy has suffered from the global credit crunch - leading to rising unemployment and tightening household budgets.

This added financial pressure could have proved a trigger to the increase in insurance fraud.

"It is worth distinguishing between cases where fraud is committed by those in financial hardship and those where it is part of more organised criminal activity," EuroDebt director Kevin Still commented.
"Where people are considering using insurance policies as a last resort to generate income by claiming against a household asset, personal possessions or a motor vehicle then they should seek professional debt advice as a legitimate alternative. Most insurers share information on claims and have robust claims management processes to determine the validity of a claim, even if it is as simple as over estimating the value of household contents."

He added: "It is also the case that many people in financial difficulty may have under insured their home contents, potentially putting genuine claims at risk. As a Debt Management Company, EuroDebt routinely finds that clients have dropped critical insurance policies because unsecured creditors are shouting the loudest for their money. At the home visits it is often necessary to re-prioritise these insurances that may often be a legal requirement, such as motor insurance."

Home insurance was found to be the single biggest source of the frauds by the ABI, counting towards around half of the total claims.

Around £97 in every £100 claimed from insurance firms in 2008 was legitimate rather than fraudulent, however.

Tags; Budgeting Advice, Young Family Finances,

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