Put the brakes on fraud

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It costs insurers £300m a year as well as policyholders an extra 5% on every premium. Muireann Bolger visits Bradford – the UK hotspot for crash for cash scams

A stream of cars drift toward the traffic lights at a busy junction, passing dilapidated warehouses with boarded-up windows and tower blocks that jut into the skyline. A few elegant Victorian buildings loom ahead, a reminder of the city’s once prosperous past. Now it is dominated by grey buildings amid a maze of road networks that serve as a gateway to the North of England.

As the lights change to green, a blue Toyota lurches forward and stops for a split second. Behind, a driver swerves, dangerously close to ramming its rear. The Toyota then speeds onwards, leaving the car behind to fall back a safe distance. But any driver in such a situation on this particular spot might be forgiven for breathing a sigh of relief. For this is Bradford, last month revealed as Britain’s number one hotspot for crash for cash scams.

In the past decade the industry has seen a surge in this form of motor insurance fraud, where criminal gangs stage collisions with motorists and then claim damages from the innocent policyholder’s insurer. According to the Insurance Fraud Bureau (IFB), fraud costs the industry £1.6bn every year, of which crash for cash scams account for more than £300m. These costs can shove an extra 5% on to every premium, leaving the policyholder to pay an additional £40.

The IFB was formed in 2006 to tackle the mounting problem of fraudulent claims. Meanwhile, the industry and police were battling with a giant criminal network that had wrangled tens of millions from insurers through crash for cash scams. “This was a network that had grown so large you couldn’t infiltrate it successfully to find the heart of it and that was what gave us the impetus to investigate through the insurance fraud bureau,” says Richard Davies, deputy chairman of the IFB and fraud risk manager at AXA. “It told us the situation was not under control.”

Davies explains the methods used by criminals are simple but effective. A fraudster will manoeuvre a car in front of a vehicle and then abruptly brake, leading to a collision. “That can be high speed on a motorway junction or low speed at a roundabout,” he says.

In recent years, a second more sophisticated form of scam has evolved. Two fraudsters will cut off a motorist in front and from behind. The car in front will brake causing the vehicle behind to stop and trigger a crash with the fraudster’s conspirator. Davies believes this is one of the most insidious scams as it leads the innocent driver to believe that he or she is to blame.

Ian Johnston, the Motor Insurers’ Bureau anti-fraud manager, says that this type of crime is especially alarming because it is so easy to perpetrate. “There are a lot of people who may not be paying attention and don’t anticipate that the vehicle in front might stop. So, unfortunately, it is quite easy to do”.

Davies believes that tackling these scams can directly curb the problem of drugs and violence endemic in socially deprived areas. “What has made our cases so attractive to local police forces is they know they are not just dealing with insurance crime but with crimes that have a real impact in their communities”.

Detective Sergeant Ben McDonald of Airedale and North Bradford CID says that gangs gain control in their areas by preying on the weak and vulnerable. “The actual gangs aren’t too big but the problem is that they criminalise communities.” This influence was highlighted in Operation Keep, a case led by the West Yorkshire Police with the help of the IFB which led to the conviction of Mohammed Rashid.

For years Rashid hid behind a front as the owner of a modest garage in Keighley, West Yorkshire, while masterminding a spate of crash for cash scams that reaped £3m in fraudulent claims. In addition to orchestrating collisions, he was able to convince his garage’s customers that were unable to afford expensive car repairs to become involved in his schemes.

“He would simply say ‘we can say this car has been in an accident, you could say it was smashed and you could pretend there were more people in your car’,” says McDonald. Rashid also exploited heroin addicts who put their name to policies in exchange for cash.

But while the Porsche-driving Rashid was enjoying a plush lifestyle, the investigation into his activities was gaining momentum. Last year, police and IFB efforts led to his conviction on fraud charges and a five-year jail sentence. Four other defendants were also convicted.

Over the past three years, the bureau has wracked up many similar successes with the police, helping to secure 300 arrests and 29 convictions.

Davies believes that as a result of this success, the size of criminal networks have dropped by 11%. “This is telling us that we are getting on top of the problem. We are catching them faster, the fraudsters aren’t operating as long before being detected – and maybe the message is out there that the IFB is prepared, has sophisticated technology and we have a clear idea of what is going on.”

However, there are fears that the present recession will accelerate the growth of these scams, with some in the industry already reporting an increase.

Phil Bird, Groupama’s director of claims, says the company has identified half a dozen new rings that have submitted claims for up to £250,000 at time. “We have certainly seen a good level of activity in the past 12 months and discovered a fair number of fraud rings. That is probably a pick-up of pace in comparison with previous years.”

The industry knows that this type of scam is extremely difficult to detect – but there are a number of vital clues. “One of the classic indicators is that you will see the same names or the same addresses appearing time and time again,” says Davies.

Another sign may include a collision which involves a commercial vehicle. “You can be relatively confident that a commercial vehicle is insured and the driver may not have that personal connection with that vehicle,” says Davies.

He warns that insurers should be wary of claims for multiple injuries that seem excessive for the type of accident and claims for phantom passengers. Some fraudsters may even be in cahoots with vehicle examiners, solicitors and doctors to bolster their claims.

It seems the North West continues to be a focal point for such scams. This year Bradford nudged Blackburn from the top position in an IFB league table of the top 20 places in the UK where these staged accidents are most likely to occur. Oldham and Liverpool come third and fourth.

Many believe that easy access to accident management companies may be a trigger for the raft of crash for crash scams in the area. Of the 1,800 accident management companies in the UK, more than one in ten is in West Yorkshire. “There is a massive link with the amount of accident management companies in the area and the number of fraudulent claims that have been committed,” says McDonald.

Davies is quick to point out that the places where the IFB have not collaborated with police are less likely to see a substantial drop in crash for cash scams. While the bureau is currently involved with 25 operations alongside 13 forces, it is hopeful that more police will see the value of IFB involvement.

He says that Liverpool where the bureau has yet to join forces with police, has jumped from number seven to four in the league table in the past year after a 10% increase in crash for cash scams.

“There is something in that where we are seeing increases, we have yet to engage the police,” he says.

Moreover, he warns that insurance companies need to ramp up efforts to alert customers to the threat. According to a 2007 YouGov poll, more than 40% of motorists are unaware of the scams “We need to continue to educate to customers,” he says. “I want to see much stronger messages to the public about what crash for cash is. I want them to be encouraged to talk to insurance fraud teams.”

On that note, he gathers his notes, checks his BlackBerry and furrows his brow. Another major case looming perhaps? And then with a purposeful stride he marches out on to the street of Bradford to be greeted by the city’s ceaseless drone of traffic.