Insurance fraud is at an all-time high. The Association of British Insurers (ABI) says it cost the industry £1.3 billion last year, or £3.5 million a day. Some 2,279 cases were detected every week – that means there were around 118,500 bogus or exaggerated claims in 2013. And the average fraud detected was worth £10,813.
Insurers make millions of pounds and have deep pockets, so why should you care? The answer is that insurance fraud is costing you an extra £50 a year in inflated premiums. After all, if the insurers want to keep making megabucks, they've got to claw back the cash somehow.
They're working hard to clamp down on fraud, too. The ABI estimates the industry spends £200 million on fraud prevention, detection and prosecution each year. But with the fraud bill having risen 18% between 2012 and 2013, its efforts are yet to be rewarded.
Fraudsters go to elaborate lengths to come up with ways to secure juicy payouts. Here are just some of the ways they've either tried, or been successful in, getting their hands on cash they're not entitled to.
Car insurance fraud The vast majority of all insurance fraud involves fake car insurance claims. In terms of the number of bogus claims, it accounted for around half in 2013 – 59,900 claims out of the 118,500 total, up 34% year-on-year.
'Crash for cash' is the most common form of car fraud. It happens when a driver slams on their brakes without warning, forcing the driver behind to crash into them – a highly dangerous undertaking. The fraudster then attempts to claim back money through their insurance.
Such is the risk involved with this type of fraud the people behind them are often involved in organised crime. Insurer Aviva believes organised crime is behind more than half of the crash for cash claims it deals with. Its fraud detection team is currently investigating 5,500 suspicious injury claims linked to known fraud rings.
Crash for cash isn't just a scam that affects cars. Sometimes other vehicles get caught in the crossfire. Buses are particularly lucrative targets for scammers. The more passengers the fraudster can make bogus claims for, the bigger the payout.
Direct Line told Moneywise that after one of its customers had an accident with a bus, in the weeks that followed it received 34 personal injury claims from 'passengers' on the bus – all from the same claims management company. The bus was not even half full at the time of the crash and it subsequently transpired that in any case the maximum number of passengers able to be accommodated on the bus was 31.
It was later discovered that one of the passengers on the bus worked for a claims management company. And as well as submitting claims for genuine passengers, the majority of claims he filed were for random people who were willing to falsify injuries. The individual was set to earn £17,000 in referral fees. However, a Direct Line spokesperson told Moneywise: "Once the police stepped in, he was 'referred' to the magistrates." Such is the extent of the bus problem that one bus company was forced to scrap an entire route after it was repeatedly targeted by 'crash for cash' fraudsters.
Home insurance fraud Of course, a staged crash and organised crime gangs aren't prerequisites for insurance fraud. Lots of fraud involves household items and opportunists.
There were 35,000 cases of home insurance fraud in 2013, which cost the industry £137 million.
Here's one example of fraud detected by Direct Line. A contents insurance customer placed a claim for a stolen watch. The policyholder told the company she had been given the watch by her parents on her 25th birthday in 2006 and the only proof of ownership she was able to provide was a photograph.
Direct Line asked the policyholder if she could email it the photograph but was told she no longer had it on her mobile phone as she had deleted it. However, she told Direct Line a friend had a picture of it on her phone that was taken prior to the theft.
The policyholder emailed the insurer her friend's photo only for Direct Line's forensic team to discover the photograph had been taken 17 days after it had been supposedly stolen.
Another fraud uncovered by the company involved a claim for damage to a sofa.
"A customer submitted a claim for a leather sofa, which her four-year-old son had reportedly damaged with a knife. Independent inspections were instructed and reported back concerns with the damage, which appeared to have occurred over a period of time," explains a Direct Line spokesperson.
Further investigation revealed that the policyholder was a serial offender and had made a previous claim for a leather sofa which had allegedly been damaged by her son with a biro, some glue and vomit. Closer inspection from photos for both claims showed the damage and indeed the sofas were identical.
Research conducted by insurer Aviva earlier this year found that two-thirds of people want insurance companies to do more to tackle fraud but the same proportion said they would not report it to the police if someone they knew committed insurance fraud.
The research also found that 23% of people knew someone who had exaggerated a genuine claim and 17% knew someone who had faked a whiplash injury to get compensation. And the number of people who would consider exaggerating a claim has increased by 35% to more than one in eight over the past five years.
So with the number of dishonest policyholders rising, there's little chance your share of the damage will be reduced any time soon.