Cops, robbers and you

It might sound like a twisted Robin Hood story, or a sequel to the movie Snatch. But the Johnson family, a notorious gang of gypsies who committed Britain’s biggest burglary and stole £80m of art and antiques from stately homes, are an insurer’s worst nightmare.

Five members of the Johnson clan, who police believe are linked to a string of crimes committed over two decades, were jailed for up to 11 years each in August.

The gang, who once bragged on a BBC documentary that they had the right to steal from “the lords, sirs and ladies”, took goods estimated by police to be worth £30m, although art experts said the true value was closer to £80m.

According to reports, the five men used their homes on caravan parks across Gloucestershire and Worcestershire to plan raids on at least seven stately homes. They then stored priceless paintings, porcelain and antiques in an underground bunker.

The effects of the Johnson family’s crimes were felt not only by their victims, but by insurers too.

Shortly after the arrests, Robert Hiscox, chairman of Hiscox, slammed the police for taking so long to catch the robbers. He even accused investigators of lacking interest because the gang’s victims were affluent and had insurance cover.

His firm had to push the police into action, he claimed. “We were very involved in trying to get the police to do something about it, but it took an unconscionably long time,” he said in August.

But the investigation to catch the Johnson family was described as “long and arduous” by the man who led it, Detective Superintendent Mark Warwick, from Thames Valley Police. The operation involved police officers from five forces across three regions and lasted more than two years.

Either way, Hiscox’s comments raise a question: do the police actually care when the wealthy are victims of burglary?

Thames Valley police disputes Hiscox’s claim. In a statement to Insurance Times, Warwick says: “It is nonsense to suggest that the service provided to a victim of burglary would be affected by their personal wealth and/or level of insurance cover.

“This particular series of burglaries was investigated by a consortium of five police forces and took the form of an extremely complex investigation. By its nature this was also lengthy, but it got results. The gang responsible were identified, arrested and charged as soon as possible, and were recently jailed.”

The insurer has refused to comment on the case since Hiscox made his remarks, claiming there is nothing more to say on the matter. It is not known how much exposure Hiscox had to the insurance claims made by the Johnson gang’s victims, but sources close to the case have confirmed that the insurer was involved.

“We knew who did it when it all kicked off. We were aware of the family, we knew we had surveillance on them, and that they were a very, very violent gang and very scary people,” says a source.

“The police were scared of them and there were a lot of them. From a political correctness point of view they’re gypsy travellers, so it took a long time to get the intelligence. There was a lot of private investigator and police time put together to bring that one to court.”

The source adds: “The issue is about what resources the police have. Sometimes it’s more difficult for them to get convictions and they’ll put their resources where they think is best. It’s not for me to comment on what the police did or didn’t do but, at the end of the day, I know the insurance industry can encourage the police to focus on certain things.”

“We find very indifferent responses from different police forces.

Neil Daniel, Merlin Claims

Bobby Gracey, head of counter fraud solutions, Europe, Middle East and Africa, at Crawford & Company, admits some insurers fund police investigations themselves to get cases settled quicker. In most cases, he says, it comes down to the resources available to police and how they prioritise certain cases.

Chubb Insurance is one of a number of insurers that deals directly with wealthy clients. Simon Mobey, UK and Ireland personal lines manager at Chubb, says the insurer does use its own special investigations unit, but this is not in response to police being slow.

“Through our special investigation unit and other claims staff, Chubb has a very good relationship with the police,” he says. “In our experience of managing claims from violent aggravated burglary to more everyday thefts, we do not believe the police respond more slowly to wealthy clients.”

But Neil Daniel, head of specialist investigations at Merlin Claims, which handles fraudulent claims for Sterling Insurance, says some insurers have been forced to take matters into their own hands. “What we find is very indifferent responses from different police forces,” he says.

“The City of London police have key performance indicators in terms of being involved with insurance fraud claims and you can see from the Insurance Fraud Bureau that they are getting more successes and more police involvement.”

He adds: “In terms of the Insurance Fraud Investigators Group (IFIG), if you look at the membership and you look at the number of police forces joining IFIG, I think police are getting on board more.”

That’s not the only piece of good news for insurers and brokers. “I think the police are more likely to get involved nowadays because of POCA (Process of Crime Act),” he says.

“All [the police] have to do is prove a certain criminality and they can seize all the assets and there is then a motive for the police to become involved, and I think that it is very relevant. It’s a fantastic piece of legislation that is specifically designed to reduce criminals’ effectiveness.”

The Johnson family’s crime spree and subsequent investigation involved heavy costs to police and insurers, and it has acted as a wake-up call to both sides. Whether it’s insurers taking the lead or building bridges with the police, it is clear they cannot afford a repeat of the Johnsons.

On the other side of the coin, it’s not always the poor stealing from the rich. And as the economic downturn continues to bite, there could be more cases of the affluent making fraudulent claims on their insurance policies.

Speaking in August, Hiscox said he hadn’t seen the financial turmoil affecting high net worth customers yet. But he expects it to hit soon.

“Financial pressure will bring a certain moral hazard. In a recession, you get more pressure to use insurance policies as a liquid asset. People stop being as careful with their possessions,” he told a briefing.

The insurer has since said it does expect the number of fraudulent claims to rise, but would not add any further comment.

Brokers and insurers in the high net worth market agree that in the economic downturn, fraud among mid and high net worth individuals could become increasingly prevalent. A source at one insurer says the strain on the stock market could be a precursor to wealthy clients committing fraud as their share portfolios decline in value.

Crawford’s Gracey says the firm has noticed an increase in claims in certain areas. He thinks the fear of fraud will provide a much-needed spur for the market to act.

“Accidental claims activity is up 115% on last year. Something is happening.

Bobby Gracey, Crawford

“I have a smile on one half of my face because the high net worth market is now talking about fraud,” he says. “Our stats show accidental claims activity is up 115% on last year and domestic claims are up 12%. Something is happening.”

When Gracey compares Crawford’s jobs for this year to jobs last year, he says

there has been a big spike in accidental damage claims – particularly in laptops, televisions and carpeting.

“There is no reason why someone coming from an affluent background wouldn’t be susceptible to fraud,” he says. “In the current economic climate it is easier to have a successful insurance claim than going to the bank and getting a loan.”

Steve Smith, director of high net worth broker Smith Greenfield, says this is a time when brokers should be particularly vigilant.

“We would agree [with Hiscox] that, when there is an economic downturn, the potential for an increased number of insurance fraud incidents is higher.”

He adds that fraud is less common in the affluent sector, although the size of the dodgy claims tends to be bigger.

“With high net worth policy cover often not having any warranties, the exposure is potentially easier to exploit. Specialist brokers like ourselves have been fortunate not to have experienced such issues. Many brokers will be experiencing an economic downturn for the first time and should be even more diligent than usual.”

Garry Simmons, associate director and head of property and liability claims at Sterling, says true high net worth customers are better placed to cope with an economic downturn. He adds that frauds tend to be for a significant

single incident, rather than a number of smaller losses.

However, he says: “While this may be the case for high net worth, we continue to see an upward trend in the number of accidental loss claims being reported by mid net worth customers. These losses are currently up 22% in volume compared to the same period last year.

“This may be as a result of fraud due to mid net worth customers not being as well placed to cope with the economic downturn or, alternatively, customers merely wishing to cash in a genuine loss where previously they would not have bothered to claim.”

So, at least for the moment, insurers shouldn’t have to worry too much about true high net worth clients, although this could change if economic conditions continue to worsen.

Insurers will have to live with this bogeyman for some time, along with real and current threats from robbers like the Johnson family.