A growing number of cash-strapped households have turned to illegal means to alleviate their financial woes, according to recent statistics from one of the nation’s largest insurers, which reveals that rising cost-of-living challenges have led to an unprecedented rise in insurance fraud. This is because of the mounting pressures caused by the rising cost of living.
Last year, there was a 13% increase in the number of fraudulent claims that were discovered at Aviva UK. These false statements were found across numerous different categories, including motor, house, and liability. In the year 2021, the massive insurance company discovered more than 11,000 cases of fraudulent claims. When broken down into daily figures, this number equates to thirty false claims being filed each and every day.
According to Waseem Malik, chief claims officer at Aviva UK General Insurance, “Fraud is typically decided to commit for explanations of need or greed,” and “we believe the increase in claims fraud last year is linked to reduced incomes during COVID-19 lockdowns.” [Citation needed] “We believe the increment in claims fraud last year is linked to reduced incomes during COVID-19 lockdowns.” Because of the rise in the cost of living, an increasing number of families and companies are coming under steadily increasing financial stress. As a result, we anticipate a growth in the number of fraudulent insurance claims, particularly those involving home, small business, and liability insurance policies.
Between the first of January and the thirty-first of May of this year, Zurich UK found a 25% year-on-year increase in the number of dishonest property claims. The industry giant situated in London also ascribed the increase to the crisis caused by the rise in the expense of living that was spurred on by interruptions caused by pandemics.
According to Scott Clayton, who is the head of claims fraud at Zurich UK, “Unfortunately, many more people are encountering challenges as a result of the cost-of-living crisis,” which is attributing to a rise in the number of false claims. “Since the beginning of the year, we have observed a considerable increase in the number of fraudulent property ownership, as the financial pressure on homes and businesses has intensified.
Exaggerating or fabricating a claim may appear to be a risk that is worth taking; yet, those who commit fraud face the possibility of being prosecuted criminally and even serving time in jail as a result of their actions. At the very least, criminals might anticipate greater difficulty in concealing their identities.
Tom Hill, detective chief inspector for the City of London Police’s Insurance Fraud Enforcement Department (IFED), disproved the assumption that generating fraudulent claims is a crime that does not affect anyone but the perpetrator.
What developments might we expect to see in the field of insurance fraud in the UK?
“We understand that the rising cost of living has made the past few months particularly difficult for many people around the country, but turning to crime is never the answer,” he said. “We acknowledge that the rising costs of living has manufactured the past few months especially difficult for many people around the country.” The submission of a false insurance claim may appear to be a crime without victims, but in reality, it contributes to an increase in the cost of premiums for everyone.
In addition to this, it may result in you having a criminal record. It may seem like a quick method to gain money if you embellish or fabricate a claim for an expensive watch or television, but a conviction will have a lasting impact on your life.
What constitutes insurance fraud?
Insurance fraud is defined as “deliberate deception perpetrated against or by an insurance company or an agent for the purpose of achieving financial gain,” according to the Economist Intelligence Unit (III) of the United States. According to the insurance research institute, applicants, policyholders, third-party claimants, and even insurance brokers and administrators themselves are all susceptible to committing such unlawful acts of fraud.
Insurance fraud “cuts across every type of insurance,” according to the Association of British Insurers (ABI), which also makes this observation.
“On one end of the spectrum, fraud may be perpetrated by charlatans,” the organization explained. “This refers to situations in which people encounter an opportunity within their everyday lives to invent or exaggerate a claim or to knowingly or unwisely provide erroneous data when implementing for insurance.” “On the other hand, there are highly organized criminal groups, such as con artists engaged in ‘crash for cash’ vehicle fraud scams,” the author writes.
How much does the insurance sector in the UK lose every year due to fraud?
It is projected that Aviva UK discovered over 11,000 fraudulent claims in 2021, which had a total value of more than £122 million. To help put this number into proportion, the insurance compared it to uncovering more than 30 fraudulent claims every single day for an entire year, with each claim having a staggering value of £336,246.
When the assessment was issued, the group stated that the figures could be even higher because it was still evaluating approximately 16,700 claims that it anticipated of being fraudulent.
Zurich UK reported that it has avoided fraud amounting to £4.2 million in the first five months of the year. This figure represents an increase from the £3.3 million that was prevented during the same period in 2021. This amounts to more than $80,000 every single day.
What are the most typical kinds of fraudulent activity involving insurance in the UK?
Corruption in the insurance industry can manifest in many ways, guess it depends on the sector. According to the statistics collected by several industry players in the United Kingdom (UK), the following are the most common types of fraud that are conducted against the various components of the financial sector.
- Claims pertaining to property
In its most recent analysis, Zurich UK discovered fraudulent property claims worth a total of £8.4 million. This represents a significant increase from the amount of £4.7 million that the insurer prevented being fraudulently claimed in the previous year. Similarly, the number of claims that were denied due to fraud increased from 394 to 473, representing an increase of 20%.
According to the company, the most common things that criminals have pretended to have lost, destroyed, or ruined are high-value jewelry, mobile phones, and televisions, with the average value of a claim reaching £8,800.
In the year 2021, home insurance accounted for 13% of all fraudulent claims that were discovered by Aviva UK. Nevertheless, the amount of events has increased by 45% since 2020, which is the largest growth seen in the past seven years. Fake claims for unintentional damage, accidental loss, and theft were the sorts of fraud that were discovered the most frequently. Additionally, Aviva found that the typical amount of money lost deceptive business claims on homeowner’s insurance was £3,645.
- Auto insurance claims
In 2021, motor fraud accounted for 60% of all bogus claims that Aviva UK discovered, representing a 10.7% increase from the previous year. The increase was caused by an increase in activity from organized fraudsters, who sought to take advantage of the opportunity prior to the introduction of the Whiplash Reforms and the return of traffic volumes following the easing of COVID-19 restrictions. This rise was driven by the fact that organized fraudsters wanted to take advantage of the opportunity before the introduction of the Whiplash Reforms.
“Motor injury fraud is different from other forms of fraud in that it puts the actual safety of people at risk through purposefully organized accidents such as crash for pay,” the insurance added. “This puts the general people in a position where they could be injured themselves.” “[It also] prevents scarce public services, such as the NHS, ambulances, police, and general practitioners, from being directed to the areas in which they are required the most,”
Aviva UK added that the traumatic injury reforms, which began to take effect at the end of May 2021 and reduced compensation awards for minor whiplash injuries, are expected to reduce the likelihood of motor injury fraud over time. This is due to the fact that the proposed law strips away the economic rewards for both organized and competitive forms of fraud.
However, the insurer has seen obvious stages that organized whiplash fraudsters are focusing their efforts on fraud connected with the repair aspects of a motor claim, including credit hire and repair, which grew by 13% in 2021. These types of fraudulent activities are attached to the repair different facets of a motor claim.
“We’ve seen particularly increase in this area after the reforms came into effect, signaling a shift in the emphasis of organized scammers,” Aviva UK stated. “We’ve seen special growth in this area after the changes came into effect.”
- Claims for injuries sustained personally
According to the ABI, cold calling is one of the strategies con artists employ to fabricate knee problem claims in order to steal money.
In the context of claims consulting firms (CMCs), the term “cold calling” refers to the aggressive marketing strategies that these businesses use to pursue minor injuries. These strategies include bombarding members of the public with unsolicited phone calls and text messages, and sometimes even persuading them to file a claim in situations in which there has not been an occurrence.
According to the data provided by ABI, whiplash is one of the most commonly reported causes of personal injury in the UK. On average, more than 1,500 compensation claims are filed in the UK each and every day. This results in an annual loss of more than £2 billion for the banking industry and increases the cost of an average yearly motor insurance payment by £90.
The statement made by the association was along the lines of, “The only way to get to the bottom of the problem is to take the financial incentives out of the system and regulate enterprises such that those caught abusing the rules are not able to continue functioning.” “The ABI is lobbying for a reform of the personal injury claims system in order to reduce fraudulent and overstated claims and make the system more efficient for real claimants,” says the website of the Association of British Insurers (ABI).
- Claims related to liability
Aviva UK’s figures showed that the number of claims for employers’ liability and public liability fell in 2021; on the other hand, the number of claims for suspected fraud increased by 12%. Slips, trips, and falls account for around one quarter of the phony liability claims that the company has found and rejected. The insurance company also has a hunch that some of the organized groups that were involved in whiplash fraud have gone on to pursue liability fraud instead, or are in the process of doing so.
- Brokering in the shadows
According to the participating in a research examination directed by the consumer advocacy group Which?, tens of thousands of drivers in the United Kingdom have been duped into actually buying fraudulent auto insurance by significantly more affordable policies that turned out to be “either non-existent or missing key details.” As a result, these drivers are driving potentially uninsured on the roads.
The fraudulent practice, which is known as “ghost broking,” is widespread on social media. Shady businesses make the claim that they can discover “unbeatable” motor insurance rates for drivers who are having trouble obtaining reasonable coverage.
According to information obtained by Which? from the Insurance Fraud Bureau (IFB), insurance companies have reported more than 21,000 policies that could be tied to the scam during the course of the previous year. The group did point out, however, that the actual numbers could be significantly higher than those shown because some victims may have been too ashamed to report the incident to police or may not have been realized that their comments had been modified.
The fraud cost UK motorists an average of £1,950 in 2018, which is a 38% increase from the average cost of £1,209 when Which? conducted an inquiry comparable to the current one in 2020.
In 2021, the United Kingdom’s national reporting centre for fraud and cybercrime, Action Fraud, said that it had registered 517 instances of ghost broking, resulting in a total loss of one million pounds. The government acknowledged that the numbers were probably much higher than they were reported to be since some people who purchase fake policies are unaware that they have done so.
What measures are being taken by insurance firms to reduce the risk of fraudulent claims?
The insurance industry has worked together with a variety of industry organisations to assist in the development of procedures to detect false claims. This is being done with the intention of preventing fraud from occurring, both against insurers and the subscribers of financial institutions. Some examples of this are as follows:
IFB is an organization that does not seek to profit from its work, but rather to discover and prevent organized fraud.
The Insurance Fraud Enforcement Division (IFED) is a specialized police squad dedicated to pursuing insurance fraudsters.
An industry-wide database of known insurance fraudsters is referred to as the Insurance Fraud Register (IFR).
The MyLicence data sharing program is a collaboration project with the government of the United Kingdom that aims to combat application fraud in the area of vehicle insurance.
Additionally, the ABI gathers on suspected bogus claims on an annual basis in order to provide its members and other stakeholders with a picture of the level of fraud that the sector faces both at the initial interview and during the claims stage. According to the organization, individual insurers also have their own processes that allow them to assess their own exposure to fraud and take efforts to limit the risks that are associated with it.
A recent article published by Raconteur Media, an independent producer of information with a focus on niche topics based in London, showed how insurance companies are also boosting their deployment of automated fraud detection technologies in order to spot dubious claims.
“Artificial intelligence technologies such as these can swiftly adapt to new circumstances and continually evolving and sophisticated fraud,” the company claimed. As an example, the company cited scams relating to COVID. “Tracking gadgets and cameras are also important weapons in the fight against fraud,” the author writes. Telematics and dashcams are two examples of technologies that provide insurers with the ability to collect extremely important data. The utilization of drone technology and geospatial platforms like Google Earth can also be helpful in determining the extent of flood damage in areas of a property that are difficult to access.
Zurich UK is one of the insurance companies in this country that is putting innovation to use to prevent insurance fraud. The insurance company has made an investment in the new NetReveal program, which makes use of algorithms and data analytics to uncover dishonest individuals who are attempting to disguise their identity by supplying false details like their name or address. Additionally, the company intends to launch real-time fraud checks on the systems of the insurer at the moment a claims processor uploads a claim to those networks.
Clayton stated that “new technology is enabling us to fight fraud more effectively and making it harder for scammers to elude detection,” regardless of whether the con artists are individual opportunists or organized criminal organizations.