Aviva, which says it discovered more than £110m worth of fraudulent claims last year, cites economic climate as a factor.
A surge in so-called “cash for crash” scams and fraudulent whiplash injury claims is being blamed for a sharp rise in insurance fraud detected by Britain’s biggest insurer.
Aviva said it discovered more than £110m worth of fraud in 2013 – up 19% on the previous year – and that it was currently uncovering 45 fraudulent claims a day.
However, while policyholders submitting inflated or invented claims for supposedly stolen or damaged valuables is still an issue, Aviva said that increasingly, insurance fraud was carried out by third parties making claims against its customers – for example, for spurious injuries as a result of an accident – and also by organised gangs.
A combination of factors including the challenging economic climate, the fact that many people see it as a victimless crime, and a lack of effective deterrents are all helping to drive up the number of cases of insurance fraud, Aviva warned.
The most common type is motor injury fraud, which accounts for 54% of Aviva’s total detected claims fraud costs. More than half of these involve cash for crash scams, where people submit false claims for damage and personal injury in relation to car accidents that either never happened or were staged.
Tom Gardiner, head of fraud at the insurer, said: “We are witnessing a trend toward third party injury and organised fraud. For example, in 2013 we identified fraud in one in nine third party injury claims.”
Aviva is currently investigating more than 5,000 suspicious injury claims linked to known fraud rings – an increase of 20% since 2012. The Insurance Fraud Bureau estimates that one in seven personal injury claims are linked to suspected cash for crash claims, with the total annual cost to insurers for these scams estimated at £392m.
The company’s largest successful fraud prosecution involved scores of organised and bogus whiplash claims with a potential value of more than £5m, where sentences of between four and seven years were handed down. But in other cases, those convicted have received suspended sentences, community service and fines of a few hundred pounds, which Aviva said “serves as little deterrent for the future”.
One problem is that while the vast majority of people who are asked say insurance fraud is unacceptable, many turn a blind eye to it, said a company spokesman. A survey showed that two-thirds of people would not report it to the police if someone they knew committed insurance fraud, a 53% increase compared to a 2008 survey by Aviva.
The public also appears to underestimate the impact of fraud; just 1 in 10 think they will be affected by it, whereas in reality everyone is impacted via higher premiums. More road accidents are caused by fraudsters seeking injury compensation, Gardiner added.
In July 2013, a report by MPs said insurers must put “their house in order” to reduce fraudulent whiplash injury claims, which have added £90 to every motor policy.
Ministers should consider reducing the limitation period for road accident insurance claims, and require whiplash claimants to produce more medical evidence, said a House of Commons transport committee report