Fraudulent PI claims: a continuing problem for the insurance industry

Figures from the ABI show that, despite a slight fall in 2016, fraud remains a problem for the insurance industry.

The problem is particularly acute when it comes to motor vehicle accidents, with car crashes increasingly being fabricated, and injuries made up or overstated. The result is a rise in fraudulent personal injury claims.

Some of these claims are the result of efforts by increasingly sophisticated criminal gangs, which specialise in staging car crashes. They often have links to other very serious crimes, including people trafficking and money laundering.

A further slice of fraudulent personal injury traffic accident-related claims emanates from unscrupulous claims management companies. These companies often focus on whiplash as a fortuitous “catch-all” for injuries that can be difficult to substantiate. Many find clients through unsolicited telephone calls, texts, and emails, and encourage otherwise law-abiding citizens to participate in insurance fraud.

The ABI figures reveal that insurers detected a massive £1.3 billion worth of fraudulent insurance claims in 2016. Together, they made up over 125,000 claims. Of this, £174 million, and 15,000 of the fraudulent claims were attributed to professional criminal operations.

A single company, Aviva, reported detecting almost £250,000 of bogus insurance claims during every day of 2016. It ascribed most of these to “cash for crash” scams, with the majority of fraudulent claims coming from third parties who were not insured with the company. Like many other large insurance companies, Aviva has sought to reassure its customers that it will “vigorously defend” them against bogus claims and prosecute the claimants wherever possible.

The penalties for those who are successfully prosecuted can be significant. For example, a motorist who attempted to claim for a back injury that he said was caused by another vehicle colliding with him on the approach to the Severn Bridge was rewarded with a six month prison sentence after CCTV evidence showed he was at fault.

The footage showed him causing the crash as a result of cutting into a line of cars. Of course, not all cases can be so easily dismissed (or confirmed) via handy CCTV evidence, and this illustrates the problem facing the insurance industry. It is also essential to remember that insurance fraud is a problem for everyone as insurance companies are forced, almost inevitably, to pass some of the cost onto policyholders.

Insurance companies are also facing so-called ‘serial claimants’, who use aliases to take out multiple household insurance policies with the aim of defrauding the company via a series of claims. Taken individually, this sort of fraud might tend to have a low value (the 2016 average for fraudulent household insurance claims was £1,315) but it is nonetheless indicative of fraudsters’ thinking. It suggests a belief that smaller claims are less likely to face significant scrutiny and more likely to be approved.

Unsurprisingly, the insurance industry is looking to Whitehall for assistance. Whilst the Government has promised both tighter controls over claims management companies and reforms on whiplash claims, it is, as yet, unclear as to the shape of any future reforms. Insurance companies would like to see radical changes to the compensation of minor personal injuries.

Although overall, the 2016 numbers were down on the equivalent figures from 2015, there is mounting evidence that the criminal element is attempting to stay one step ahead of any potential reforms. Increases to bogus liability claims for, for example, food poisoning suffered in hotels or on cruise ships hint at the direction in which the problem may be moving.

Article supplied by Clifford Johnston & Co

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