Insurance Claims Fraud Spiked 13% Last Year


May 2022
Insurance Claims Fraud Spiked 13% Last Year (1)

Insurance Claims Fraud Spiked 13% Last Year

Insurance giant Aviva uncovered more than 11,000 instances of claims fraud last year, busting cheats as they tried to falsely claim more than £122 million.

Overall claims fraud was up 13% from 2020, with particular spikes in the numbers of bogus home insurance and liability claims. The firm exposed the equivalent of more than 30 fake claims, worth a total of £336,246 on each day of the year.

Aviva says the true numbers could be even higher, as it continues to investigate a further 16,700 claims for suspected fraud.

Bogus claims on home insurance policies saw the biggest spike: up 45% year-on-year, the biggest rise detected in seven years. Scammers made fraudulent claims for accidental damage, loss, and theft, with an average claims value of £3,645. The most common dishonestly claimed for items were mobile phones, televisions, laptops, and jewellery.

Although fake home insurance claims accounted for only 13% of the fraud Aviva detected, the surge in claims means it will be a priority for the insurer in 2022.

Meanwhile, the insurer said that its motor insurance products continued to be the biggest target of fraud. 60% of all fraudulent claims detected were on motor insurance policies, including many fake injury claims.

The Whiplash Reforms, which finally came into effect in May 2021, are expected to reduce the incidence of motor injury fraud as compensation for whiplash is capped and claimants are required to cover their own legal costs. Aviva has said the reforms “will remove financial incentives for both organised and opportunistic fraud”.

But the impending enforcement of the reforms, which had been delayed by the pandemic, prompted a flurry of bogus whiplash claims in the first half of the year. Organised fraudsters also took advantage of the increase in traffic volume as pandemic restrictions were eased. Overall, motor injury fraud was up 10.7% in 2021.

Aviva notes that motor injury fraud is different from other types of fraud in that it doesn’t merely lead to higher costs for the insurer and thus higher premiums for customers. “It puts the public’s personal safety at risk through deliberately organised accidents such as crash for cash, and diverts scarce public services – including the NHS, ambulance, police and GPs - from where they are needed most,” the insurer said.

With whiplash no longer such a lucrative scam, there are signs con artists are cultivating other sources of income, including targeting the repair aspects of motor claims. 

In one common ruse, drivers who’ve had a non-fault accident are contacted by an accident management company that claims to be sent from their insurer and offers them a courtesy car. But the vehicle is actually hired from that firm. Meanwhile, they put your damaged car into a garage they’re in cahoots with. The garage drags out the repair for as long as possible, leaving you driving the hired vehicle for weeks or even months. 

The bill for that hire comes to thousands of pounds. The nefarious firm first tries to wrest the hire fee from the driver's insurer and, if the insurer won’t pay out, from the driver himself, who has unwittingly signed a contract leaving them liable for the charges.

This type of credit hire and repair scams were up 13% in 2021, with particular growth after the whiplash reforms came into effect in late May, Aviva said.

Scammers are also spinning scams on car insurance applications. Last year Aviva identified fraud on more than 20,000 motor policy applications. 15% of these applications involved a devious type of fraud called ghost broking

In ghost broking, an unauthorised person poses as an insurance broker and sells a victim a faked insurance policy. In some cases, the scammers falsify details in the application to cut the price of insurance, such as lying about the driver's age or address. This deceit makes the insurance policy worthless, meaning drivers are unwittingly driving without cover.

Aviva says it has a dedicated team focused on detecting and preventing ghost broking. It also urges customers to be “wary of insurance offers from unclear, unsolicited or unusual sources” especially online messaging and social media platforms. If customers are concerned about the legitimacy of an insurance offer, they should see if the broker is registered with the Financial Conduct Authority or British Insurance Brokers’ Association or contact the insurer directly.

Aviva also declined 12% more claims against businesses’ employer's liability or public liability insurance policies. The firm suspects that some of the organised gangs previously involved in whiplash fraud are also moving into liability fraud, including the staging of falls on commercial premises. A quarter (25%) of bogus liability claims rejected by the insurer were for slips, trips, and falls. 

Aviva attributed the overall rise in fraud last year to pressure on incomes during the pandemic. But with the coronavirus crisis followed closely by the cost of living crisis, fraud will likely continue to climb.

“As more households and businesses come under increased financial stress due to the cost of living crisis, we expect to see more claims fraud, especially on home, small business and liability insurance policies,” said Waseem Malik, Chief Claims Officer, Aviva UK General Insurance. "Insurance fraud is a crime, and we are continuing to invest in strengthening our fraud defences to protect genuine customers from the impact of fraud and to keep premiums low.”