SMEs conducting ‘severe gross exaggeration’ on claims has ‘gone beyond a joke’

Cash flow concerns arising from the Covid-19 pandemic and associated lockdowns are forcing small businesses to turn to insurance fraud, with “severe gross exaggeration” on claims now “beyond a joke”, according to James Burge, head of counter fraud at insurer, Allianz.

Speaking at December’s virtual Fraud Charter roundtable event, hosted by Insurance Times and sponsored by Carpenters Group, Burge explained that SMEs – such as “shopkeepers and the like” – are “going hell for leather on just trying to increase [theft] claims to a degree that is completely unreasonable”.

This includes SME owners making a claim following an alleged break in and theft, yet the shop’s own closed-circuit television (CCTV) footage disproving the policyholder’s account of the incident, suggested a potentially staged scenario.

Burge described these situations as “complete implausible”. He added that this “really quite severe gross exaggeration” from SMEs has “gone beyond a joke”.

Donna Scully, director of Carpenters Group and Fraud Charter chair, noted that claims in this vein “smacks of looking for money” and “smacks of desperation”.

Cash flow causation

However, Scully pointed out that Fraud Charter attendees’ own predictions have come to pass with Burge’s feedback. She explained: “We always felt like the financial implications [of Covid-19] were going to make people think about exaggeration or ways that they could make money - and furlough is gone now.”

Ruth Needham, partner at law firm Keoghs, agreed. She said: “What’s starting to come in that I’m seeing a little bit more of is the financial implication of Covid are starting to hit now. We always knew there would be a bit of a delay on that.”

In particular, Needham is seeing “a rise in high value vehicles being stolen” – notably including three “incredibly expensive” McLaren 720S cars. She added that she has worked on more of these cases in the last two months than she has over the past five years overall.

She attributed this trend to delayed cash flow problems arising from the pandemic.

“It’s the cash flow piece now. People are struggling. They may have assets, they may have a business, but if there’s no money coming into it, or the money coming in isn’t enough, and they’ve held out and held out – if you have a business, you just need that one car to pay out and that might tick you over for another three, four months.

“It feels like that is starting to trickle in now.”

Needham suggested that arson could be next on the insurance fraud agenda if policyholders’ cash flow continue to be constrained.

Mistaken identity

Scully further raised concerns around the uptick in identity fraud – anecdotally, she has seen fraudsters impersonate banks.

She believes this type of fraud has become easier for scammers to action due to the increased use of technology and digital communications during the Covid-19 pandemic, which has seen face-to-face communications and verification become less prevalent thanks to social distancing requirements.

Furthermore, she queried whether fraudsters have had more time on their hands to conduct identity fraud since being bound by lockdown rules and unable to conduct crash for cash scams, for example.

Karen Mann, a partner at DWF Law, agreed that more time stuck at home during the pandemic has caused fraudsters to explore different avenues of identity theft – she noted that even the Manchester County Court was being impersonated by criminals, with fraudulent phone calls being made from its contact number.

Ticker’s anti-fraud manager Anna Baker added that the number of scams mimicking HM Revenue and Customs (HMRC) over the course of the pandemic lockdowns has escalated too, but that this has caused problems for the insurance sector.

Fraudsters impersonating HMRC have been able to lure personal details from individuals who have thought they were entitled to rebate payments, perhaps if they have been on furlough during the pandemic.

As this information is fundamentally correct and – thanks to the fraudsters – readily available, this can make it harder for insurers to verify policyholders’ details and check for application or claims fraud.

Scully emphasised that identity theft would be a trend the Fraud Charter forum must keep an eye on for 2022.