For as long as there have been insurance companies, there have been fraudsters looking to cheat the system and make money from false claims. From deliberately causing minor car accidents to staging home fires, insurers are aware of every trick in the book. Let’s take a look at 5 of the most common examples of insurance fraud.
1. Stolen Cars
Motor insurance fraud is estimated to cost the UK insurance industry over £1 billion annually. Often, these claims are opportunistic and involve little to no planning. However, there are also numerous cases where criminal gangs commit elaborate acts of fraud following months of planning and organisation.
One of the most common types of insurance scams involves stolen cars. This is becoming more prevalent and lucrative particularly with the increase in the numbers of people taking out “new for old” insurance policies. Fraudsters often buy a new vehicle, drive it around for a couple of years, dispose of it and then make a claim on the insurance and effectively enjoy free motoring by receiving a brand new vehicle or cash equivalent.
Advances in vehicle security means that the alleged theft of the vehicle is becoming more difficult to explain to insurers as most vehicles nowadays cannot only be stolen with keys but the methods and explanations used by criminals are becoming far more sophisticated.
Disposal of the car can also lead to further financial gain as in some cases, scammers will sell it onto a criminal body shop to be broken into parts before claiming to their insurer that the car was stolen. Another method involves getting a friend to ‘steal’ the car and before abandoning it, deliberately crashing it and ensuring that the damage is such that it would not be economically viable to repair.
Perhaps the most elaborate type of stolen car fraud involves selling the car to an overseas buyer without any paperwork before reporting it stolen once it’s been shipped overseas.
2. Minor Car Accidents
Some fraudsters will stage minor car accidents in order to make insurance claims.This can involve breaking suddenly so that the car behind runs into the back of the vehicle. Not only can this lead to claims for vehicle damage, it can also see fraudsters making personal injury claims for whiplash.
Sometimes, two drivers will stage an accident so that they can claim whiplash injuries. There are also ‘phantom passenger’ claims where fraudsters tell insurers that numerous passengers were involved in an accident. In recent years, insurers have cracked down on whiplash claims. In a bid to tackle fraud, many insurers require claimants to undergo a medical test to assess the extent of the injuries they’re claiming for.
3. Staged Home Fires
There have been instances where people have set fire to their own home in a bid to make a large claim on their insurance. Sometimes, homeowners will remove valuable and precious items from the home before starting the fire. They’ll then make an insurance claim for the most expensive items. Unfortunately for fraudsters, it’s quite easy for investigators to determine whether the fire was started deliberately. In some cases, investigators are even able to identify whether the items being claimed on the insurance were even present in the property at the time of the fire.
4. Commercial Liability Fraud
Employers liability insurance covers employee injury, disease and death as a result of employment. Public liability insurance relates to injury, disease and death to members of the public. There have been countless cases of employers making fraudulent claims relating to the above. Some of these claims require extensive organisation and can involve fictitious accidents or the exaggeration of real ones.
There have been cases where both homeowners and renters have staged burglaries and robberies in order to claim for household items on their insurance. They may intentionally damage their property or ask a friend to break in, make a mess and ‘steal’ items. In some cases, residents exaggerate real crimes by claiming for items they never owned.
Although fraudulent insurance claims are extremely common, in recent years insurers have gone to great lengths to catch those they suspect of falsifying claims. Insurance companies now invest £200 million into fraud identification and prevention each year and in 2014 alone, 130,000 fraudulent claims were identified.