Insurers volunteer to pay for anti-fraud police unit

Insurers will save £90m in three years from a new industry-funded anti-fraud police unit, a City of London top policeman has predicted.

The team, which will be made up of 35 detectives together with support staff, is set to be launched next year.

In a significant move reflecting the tough public spending climate, the ABI has agreed to provide the unit’s £9m setting up and operational costs over the next three years by slapping a levy on its members.

“I’m absolutely convinced that the £3m per year investment will bring back 10 times that amount in terms of revenue savings for the industry,” City of London Police Commissioner Adrian Leppard said.

The ABI general insurance committee agreed the funding, and the levy details will be published by the end of this year.

The trade body agreed to fund the new unit in response to police spending cuts. An ABI spokesman said: “The decision was taken because fraud is a continuing issue for us. We recognise that fraud is already, understandably, some way down the police’s priorities, and it’s only likely to move further down with the lack of police resources.”

He added that the decision to fund the new unit was not a sign that insurers would pay for further police work and that insurers would continue to resist paying for public sector initiatives. ABI funding will be reviewed after two years.

The team will start by cracking down on organised insurance fraudsters, Leppard said. “I could certainly see ‘cash for crash’ being an area we could focus on right at the very beginning,” he added.

The new team will be run by the Economic Crime Directorate of the City of London Police, which leads on financial crime fighting.

The unit will be overseen by a board of members from the ABI, the Insurance Fraud Bureau, City of London Police and the National Fraud Authority.

Allianz chief executive Andrew Torrance said: “I look forward to seeing some high-profile successes that can be used to deter potential fraudsters and debunk the myth that insurers and their honest policyholders are an easy target.”

News of the launch came days after the ABI announced an insurance fraud register to record details of known insurance fraudsters.

Earlier this year, the House of Commons transport select committee recommended the establishment of an industry-funded unit dedicated to tackling insurance fraud in its report on the cost of motor insurance.

Pass notes: Fraud levy

Why has the police asked the industry to put its hand in its pocket to cover the fraud unit?

The police service faces estimated cut backs of 20% to its budget over the next four years, putting pressure on all budgets, including anti-fraud activity.

Why are fraud teams being hit particularly hard by the cuts?

Fraud is expensive to detect and investigate, and swallows up resources that are in increasingly scarce supply. At the same time, it represents a lower priority for police forces than more visible crimes like theft and burglary, which have a more tangible impact on residents’ daily lives.

How will the industry react to the news?

Insurers have traditionally resisted calls for them to take over the funding of services like police, arguing that it represents the thin end of a wedge. Some warn this could ultimately lead to insurers paying for fire services, for example. However, the unit’s establishment means that progress in fighting fraud can be maintained, which no insurer would argue with.

Why will the unit prioritise organised fraudsters?

Cracking organised fraud is likely to deliver the richest pickings. At the same time, investigating insurance fraud can provide the police with a route to tackle organised criminals.