Insurers are bracing themselves for an increase in claims as the UK economy slows
The leaked Home Office document predicting increases in crime as a result of the credit crunch will have caused concern among insurers who could be among the potential victims.
The document – which took the form of a letter from Home Secretary Jacqui Smith to 10 Downing Street – outlined fears that the economic downturn could result in a rise in violent crime, increased hostility towards migrants, and a growth in far right extremism, which could lead to a greater risk of terrorism.
Most pertinent though was the assertion that the state of the economy could place “significant upward pressure on acquisitive crime”.
What does this mean? Basically, the Home Office is saying that there may be an upsurge in crimes such as burglary and car break-ins.
Meanwhile, the Home Secretary has also warned that theft could rise due to the fact that goods such as MP3 players and mobile phones – though affordable at present – may end up beyond the means of those whose wages are decreasing in real terms.
To make matters worse, the letter also says that efforts by the police to tackle such crime could be hampered by a lack of funding due to high fuel costs and rising salaries. So, we have a potential combination of more theft and a decrease in the capability of the police to tackle it.
In addition to concerns about an increase in claims on home contents and motor policies, insurers have another worry. The ABI said this week that an increase in crime would likely mean an increase in insurance-related crime.
According to the ABI, there was evidence of an increase in fraudulent arson claims during the last economic downturn. An ABI spokesman said that while the organisation was not in the business of crime analysis, there was anecdotal evidence that when the economy is depressed, people look to raise money through “less than honest means”.
The bad news for people insuring their home or car, for example, is that the cost of their policies could increase as insurers look to claw back cash they’ve lost as a result of a rise in fraudulent claims.
