Brokers say fraud on the rise

More than two-thirds of brokers (69%) think that insurance fraud is getting worse, according to a new report by Legal & General.

The insurer's FraudStoppers Report also found that many brokers and advisers feel that little is being done to deter fraudsters, with more than half (57%) confident that a customer could get away with an inflated claim.

But nearly three-quarters (73%) confess that they have no processes in place to help identify and prevent home insurance fraud.

And the overwhelming majority of insurance intermediaries are not aware how much the cost of fraud adds to the average home insurance premium. According to the research, fewer than one in ten insurance intermediaries correctly identified how much fraud adds to the average home insurance premium, with 84% underestimating the impact.

The findings are backed up by consumer research that shows a significant section of the British public think that it is acceptable to commit insurance fraud.

Nearly a third of consumers (29%) think it is acceptable to exaggerate a home insurance claim, by for example adding extra items or increasing the value of the amount being claimed.

One in ten consumers surveyed by L&G said that they believed there is no harm in using a house insurance policy to try to replace and upgrade to the next generation gadget, which the report calls 'up-raiding'.

Many of the brokers surveyed who have processes in place mentioned that these included checking previous insurance cover records and claims history, as well as stressing the importance of educating their clients on what constitutes home insurance fraud and the implications of making a fraudulent claim.

According to ABI figures, released last month, the value of fraud claims rose by 14% on the previous year to £840 million.

Steve Phillips, head of fraud services at L&G’s general insurance business, said: "Intermediaries have a vital role in helping to reduce home insurance fraud. Given the direct contact they have with their customers, brokers and advisers can contribute to improving customers' general understanding of what constitutes insurance fraud, the implications of how it impacts them and the serious consequence for their clients if they should commit fraud.

"More people need to appreciate that fraud at any level is not a victimless crime and means additional cost to everyone's premiums. Intermediaries can really help to reduce the level of exaggerated claims received by explaining to their customers that adding items to their claim or inflating a claim's value is fraud.

"Legal & General has a zero-tolerance policy on fraud and our success at detecting fraud has helped to maintain premiums for customers. The FraudStoppers Report highlights how serious the problem is. We pay all valid claims as quickly as possible but we're totally dedicated to tackling fraud, and catching the cheats. So to prevent their clients from being added to the insurance industry's fraud databases we need to work together to stop it happening in the first place."