Insurers are under increasing pressure from fraudsters as economic conditions worsen
This week the ABI reported that motor insurance fraud is rising. Last year, insurers uncovered 240,000 fraudulent motor insurance claims – a record amount, worth a total of £260m.
The figures showed that the incidence of fraudulent motor claims had increased by 70% in the last three years, the ABI said.
It should come as no surprise that motor insurance fraud is on the increase. With consumers under increasing financial pressure from rising mortgage payments, fuel costs and food prices, an increasing number are being tempted to commit insurance fraud.
One of the many insurers fraudster caught out had planned to use his insurance payout to meet the hire purchase payments for his car. He claimed the car had been stolen, we in fact it was proved that he pushed it over a cliff.
This tale is not unusual. When money becomes tight, people are more tempted to turn to insurance fraud which is often seen victimless crime to pay the bills.
Of course insurance fraud is not a victimless crime. Motorists pay an extra £40 a year on average because of fraud, the ABI says.
And it is not just motor insurance fraud that increases when economic conditions worsen.
The frequency of fraudulent activity rises in other lines of business. Arson claims relating to business premises tend to increase when the economy cools, as under-pressure business owners torch their collapsing businesses and claim on the insurance.
Similarly fraudulent home insurance claims rise as cash-strapped policyholders become more tempted to inflate legitimate claims or make entirely false ones.
The challenge for the insurance industry is to ramp up their fraud detection activities to ensure that, as the economy slows down, they are not caught out.
