Insurance fraud soars to £1.9bn

The cost of undetected fraudulent general insurance claims is now £1.9bn a year, up 24% from £1.6 billion two years ago it has been claimed.

According to a report published today by the ABI, the cost of insurance fraud is now estimated to be £5.2 million every day, costing, on average, an extra £44 a year to every household premium.

But the report also claims that insurers are detecting more of the fraud being committed. Last year, frauds worth £730 million were detected and prevented – a 30% increase on 2007.

It said that more people are being caught lying or withholding relevant information in attempts to get cheaper insurance.

Nick Starling, the ABI’s director of general insurance and health, said: “There is no hiding place for insurance cheats. Honest customers should not have to pay for the fraudsters. The tough approach taken by insurers to protect honest customers means that they are detecting more of the fraud committed.

"Closer scrutiny of proposal forms and claims, as well the exchange of information through industry-wide databases, is tightening the net on the cheats. Getting a criminal record, as well as difficulty in obtaining and more expensive insurance and credit problem await anyone who sees insurance as a soft touch.”

Popular scams included withholding information about a speeding conviction, listing the wrong address for a motor insurance policy or listing a parent as the main driver of a vehicle that was used most by a newly qualified driver.

The ABI also reported an increase in the number of fraudulent accidental damage claims made on home insurance policies, with people deliberately damaging furnishings or electrical goods.

It also reported a 35% rise in claims involving the damage or loss of high value watches, laptops and LCD televisions.