False claims cost the average household £44 a year despite improved detection of fraudsters

The value of insurance fraud has soared to an estimated £1.9bn a year, costing the average household £44 annually in higher premiums, a report showed today.

Insurers think around £5.2m of fraudulent claims go undetected every day, a 24% increase compared with two years ago, according to the Association of British Insurers.

But firms are also detecting more fraud, with suspect claims worth £730m rejected last year, 30% more than in 2007.

The ABI said as insurers got better at detecting fraudulent claims, people were shifting their focus to the other end of the process and were lying or withholding relevant information in an attempt to get cheaper insurance premiums.

Popular scams included withholding information about a speeding conviction, listing the wrong address for a motor insurance policy or listing a parent as the main driver of a vehicle that was used most by a newly qualified driver.

The ABI said it had also seen an increase in the number of fraudulent accidental damage claims made on home insurance policies, with people deliberately damaging furnishings or electrical goods so that their insurer would pay for new ones.

It also reported a 35% increase in claims involving the damage or loss of high value watches, laptops and LCD televisions.

Household insurance policies saw the highest level of detected fraudulent claims by volume, while motor insurance ones had the highest level in terms of value, with staged accidents still common.

In one case, a woman claimed for the theft of a camper van that had been written off beyond repair 10 years earlier, and in another case a man had a claim for a 42in LCD TV rejected because he claimed he had bought it before it became available on the market.

Dropped claims

The ABI also reported a rise in the number of claims which were dropped by consumers once insurers started asking them for more information.

Nick Starling, the ABI’s director of general insurance and health, said: “There is no hiding place for insurance cheats. Honest customers should not have to pay for the fraudsters.

“Closer scrutiny of proposal forms and claims, as well the exchange of information through industry-wide databases, is tightening the net on the cheats.

“Getting a criminal record, as well as difficulty in obtaining and more expensive insurance and credit problems await anyone who sees insurance as a soft touch.”

Research carried out by the ABI found that 16% of people would not rule out making an exaggerated insurance claim, while 44% think it is acceptable to increase the value of an item when claiming.

A further three out of 10 people thought it was acceptable to exaggerate the extend of any damage being claimed for.

People in the north-east and West Midlands were most tolerant of insurance fraud, with a quarter of people in the north-east saying they would not rule out making a fraudulent claim, while people in both regions were more likely to think it was acceptable to inflate the value of a claim.