What is Insurance Fraud?
Insurance fraud is when someone makes a false claim, by way of invention or exaggeration, in order to obtain cover for cheaper. Or any act committed with the intent to fraudulently benefit from an insurance process. It is commonly opportunistic, with the claimant exaggerating or misreporting on an otherwise legitimate claim, though it can be a more serious organised crime where the claimant deliberately plans the fraudulent scheme.
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How does Insurance Fraud affect the industry?
Insurance fraud is a serious crime and can even lead to imprisonment. The Association of British Insurers estimates that the typical UK policyholder will pay an additional £50 on average on top of their annual insurance bill to cover the fraud. The less fraud there is, the less money honest customers will have to pay for their insurance – as fraud causes insurance premiums to be higher. Insurers invest over £200 million each year to identify and combat fraud to keep costs down for everyone.
Malcolm Tarling, from the Association of British Insurers, said:
“The vast majority of customers are honest but there are a fraudulent few out there who are pushing up the costs of insurance for everyone else. We’re spending over £200m a year in protecting honest customers. Cheats range from everything – the opportunist fraudster who puts in a claim for a stolen camera that wasn’t stolen while on holiday, to the organised, premeditated fraudster committing staged motor accidents.”
Read our post on Why It’s Getting Harder To Be An Insurance Cheat
In 2014, 130,000 fraudulent claims (worth £1.32 billion) were uncovered by insurers across all insurance products. That’s roughly £3.6 million a day – a record high detection rate! Insurance fraud detection is at its most efficient, as more is being invested to tackle the issue.
There are a number of initiatives set up to win the war against insurance fraud, including:
- the Insurance Fraud Bureau (IFB) – non-profit organisation specifically targeting organised fraud.
- the Insurance Fraud Register (IFR) – industry-wide database that dedicated to sharing knowledge of known insurance fraudsters
- the Insurance Fraud Enforcement Department (IFED) – police unit tasked with prosecuting insurance fraudsters