Fraudsters unafraid to ‘exploit hard times’ for insurance scams

The insurance industry is fighting an ongoing battle against fraud, with experts at the Insurance Fraud Bureau (IFB) estimating that one insurance scam takes place every minute.

These frauds can be devastating for the victims involved as well as expensive for insurers – the IFB believes insurance fraud costs the UK’s economy around £3bn a year.

In addition, as insurance services are becoming faster and increasingly digitised, so too are the tactics of fraudsters.

However, the industry continues to fight back by building new fraud detection systems and improving methods of prevention.

Insurance Times takes a closer look at current fraud trends and explores how insurers are looking to combat these fraud strategies.

Crash for cash

According to the IFB, motor insurance claims fraud is the most common type of claims fraud, by both volume and value.

Some motor insurance fraud scams can also be extremely dangerous. ‘Crash for cash’ scams often see fraudsters induce deliberate collisions on the road, often with innocent road users, in order to try and claim for compensation.

IFB analysis of 2.7 million motor insurance claims made across the UK between October 2019 and December 2020 identified over 170,000 claims that could be linked to suspected crash for cash networks.

Stephen Dalton, head of intelligence and investigations at the IFB, said: “This scam has caused countless injuries and we’ve even seen cases where tragically innocent people have been killed.

“In addition to the impact of fraudulent claims, application fraud is a significant threat. Scams are becoming increasingly complex with application fraud having links to identity theft and wider cyber crime.

“Serial crash for cash scammers will take out fraudulent applications using stolen identities to help facilitate a high running number of fraudulent motor claims.

“They are also not afraid to exploit hard times. During the pandemic, we have found fraudsters exploiting the state of the job market by advertising bogus delivery driver roles, only to take unsuspecting applicants’ IDs and car insurance details to facilitate crash for cash scams.”

Recession ripple effects

However, property and casualty fraud is also on the increase, in particular around cavity wall insulation (CWI) claims. Allianz Insurance, for example, detected £2.6m worth of exaggerated and false CWI claims last year.

James Burge, head of counter fraud at Allianz Insurance, said: “The other trend we’re seeing is the involvement of organised crime, sometimes with the participation of rogue loss assessors.

“We even had to refer a lawyer to the Solicitors Regulation Authority (SRA) after they submitted multiple claims for staged collisions, suggesting they were either complicit or failed to carry out proper checks. Last year, our organised fraud team tackled over £5.5m worth of fraud.”

The IFB added that financial hardship can fuel fraud, with the 2008 recession causing a 17% increase in fraudulent claims.

It said the insurance market is now seeing a similar increase in opportunistic fraud across motor and property policies, including claims which are staged, contrived, fabricated or exaggerated to make extra money than what would otherwise be legitimately deserved.

Dalton continued: “This could be a result of the financial hardship so many people and businesses are facing right now. We’ve also seen rising reports of first party misrepresentation and identity theft, which is sadly fuelling ghost broking activity.

“It’s still early days to say with absolute certainty how Covid-19 is going to affect insurance fraud levels – especially as furloughing and various support schemes have provided insulation to the expected financial motivations that surround fraud.

“The ripple effects of recessions can be felt for years, so we need more time to understand the full impact.”

In total, Allianz detected a record £65.8m worth of insurance fraud in 2020, as it took on claims farmers, rogue loss assessors and organised crime.

Defeating fraud

Allianz said it has made higher fraud savings as a result of its new large loss team adopting a ‘Know Your Opponent’ strategy, which is focused on rogue loss assessors.

Burge explained: “We’ve taken proactive steps to improve collaboration over the past 12 months and these results demonstrate they are working.

“During 2021, fraud detection and prevention will remain a key priority for Allianz and our plan is to continue to build on the collaborative approach we’ve put in place, which is clearly achieving excellent results.

“Our ‘Know Your Opponent’ strategy focuses on rogue loss assessors and solicitors. By analysing our claims data, we can detect anomalies. For instance, when one solicitor lodged multiple personal injury claims resulting from collisions that turned out to be staged, we knew we had to investigate.

“The insurance industry is already quite skilled at detecting fraud. Day in, day out, we analyse data, spot patterns and exchange intelligence in a highly regulated way. Innovation and cooperation are our best weapons to defeat criminals.”

Increasingly the insurance industry is pursuing private prosecution as a deterrent to other would-be fraudsters.

However, to further protect consumers the industry must communicate about common and emerging scams. It must warn the public what to look out for and provide practical information and education.

Dalton said: “We’ve been collaborating closely with the insurance sector to share intelligence and information, which has huge benefits when it comes to preventing and disrupting fraud.

“This includes providing ongoing workshops and threat assessments and we frequently issue intelligence reports across the industry and to police networks to flag emerging threats.

“The industry is also significantly investing in technology to help detect new fraud patterns.

“We also regularly run awareness campaigns to help educate the public on how they can avoid falling victim to fraud [as well as reporting] it to the IFB’s confidential Cheatline.”