Fraud Charter: Insurers preparing for Covid claims ‘explosion’

Claims related to Covid-19 could “explode”, the latest Insurance Times Fraud Charter has heard.

There has been a proliferation of claims management companies (CMCs) set up to process coronavirus claims, law firm DWF’s head of fraud Paul Holmes said.

Although we are only at the early stages of a claims cycle, insurers are concerned about the potential for fraudulent claims relating to the pandemic.

Claims farmers - some linked to known fraudsters - are already approaching those who have had the virus and encouraging to make a claim against their employer, upon the assumption that it was caught in the workplace.

The Health and Safety Executive has said if someone contracts Covid-19 in the workplace, then the employer has to submit a report that they’ve been infected by a biological agent.

”You can imagine a claims farmer contacting someone who’s had Covid-19 and the person saying ‘I’ve only been to work and one of my colleagues has come down with a covid infection’,” Holmes said.

There is also the risk of secondary exposure via family being infected, he added.

Holiday sickness

Holmes sees Covid-19 claims as akin to holiday sickness claims; they are relatively straight forward to prove a breach of duty, he said. Proving it was caused at a location is more difficult though.

”It will go one of two ways,” he said. ”Claims will either peter out if insurers get on top of it quickly and try and challenge them on causation - as eventually happened in holiday sickness claims - or this is going to explode.”

Donna Scully, director at law firm Carptenters, added: ”CMCs will look at people sitting at home furloughed and say ‘this is a new fire we can light’. If anything is done about it, it needs to be at a high level.”

Despite fewer journeys being made on the road, which has led to an overall fall in claims, staged accidents could go up as fraudsters become more desperate amid the economic downturn caused by the lockdown, the panel said. 

Another trend that appears to be on the rise since the pandemic hit is an increase in motor theft, Holmes said. “It’s surprising that thefts would go up legitimately at all,” he added.

”Many of the dodgy incidents happen away from home, not as many as you’d think on people’s driveways. 

“To see thefts going up is a concern, but it makes sense if people are financially stressed,” Holmes added.

There is also an increased layering of claims due to Covid-19, with additional days added on to credit hire claims, for example to cover the virus die-off period and vehicle deep cleaning.

There are also some CMCs with ties to repairers who are adding on credit hire because the repairer has been temporarily closed down and the vehicle locked in due to coronavirus, the panel said.

The lockdown is also making physical inspections more challenging, giving fraudsters greater opportunity to fake or inflate claims.