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Insurance Fraud:
why it pays to tell the truth

Lying about no claims discounts, theft of fictitious belongings from the home, claiming for fake car accident injuries, and giving false addresses, are just a few of the tactics of fraudsters seeking cash and cheaper home contents and car insurance.

According to the latest report by the Association of British Insurers (ABI), issued in July, the credit crunch has fuelled a rise in underwriting fraud, which it estimates now costs the industry £5.2 million every day. This adds up to a whopping £1.9 billion a year, a rise of 24% from £1.6 billion two years ago.

More worrying still is what appears to be the current prevailing attitude to 'playing the system.'

To take the moral temperature of UK consumers regarding insurance scams, the ABI also commissioned an independent opinion poll* of over 3,000 adults.

The results make for alarming reading: 16% of those surveyed said that they would not rule out making an exaggerated insurance claim.

44% of the adults polled stated they believe that it is acceptable or borderline behaviour to increase the value of an item when claiming, while three out of ten people said that overstating the extent of any damage being claimed for was also acceptable.

The real cost of insurance fraud

The truth about these scams is that the cost of underwriting fraud is ultimately passed onto the consumer, guilty or not! Motor insurance fraud, in particular, is costing Britain dearly, and law-abiding motorists have every right to be angry. The fact is that widespread car insurance fraud has now added an unfairly punitive £44 to the average policyholders' annual car insurance bill.

The common car insurance fraud scams include:

• Claims for fake whiplash after minor accidents.
• Lying about how many passengers were in the vehicle at the time of an accident.
• Fronting - a fraud whereby a parent or older person claims to be the main driver when it is, in fact, a young driver who would be subject to higher premiums.
• Providing false addresses in order to get lower premiums for residency in a low risk crime area.
• Falsely claiming more years of no-claims discount that have actually been accrued.
• Withholding information and failing to declare speeding and drink driving convictions.
• Lying about annual mileage to reduce premiums.

The good news for honest consumers is that the insurance industry is fighting back with clamp downs on criminals steadily on the rise.

The ABI reports that insurers are detecting more of the fraud being committed and successfully prevented £730 million worth of scams last year. Yet while this is a significant 30% increase on 2007, insurers admit they're up against an ongoing battle as more people turn to crime during the recession.

Actions designed to beat the cheats include tighter scrutiny of proposal forms and claims, as well the exchange of information through the industry-wide agency, The Insurance Fraud Bureau.

Among the biggest scams detected and reported by the ABI, include the case of a woman who claimed for the theft of her campervan, which was then discovered to have had been written off beyond repair ten years previously.

Another claimant was found in contempt of court and fined £2,500 for inflating a claim of damages for personal injury.

And among the most memorable of detected home contents insurance fraud cases was that of a man who claimed for damage to his 42-inch LCD TV. His claim might well have got through had he not said he'd bought it before the particular new model had actually been on the market.

The message is clear - motor insurance fraud and false claims on home contents insurance policies will no longer be easy pickings. Anyone caught lying or withholding relevant information in an attempt to obtain money or to get cheaper insurance could face criminal charges. In addition to a criminal record, fraudsters will find it tough to get credit and insurance and be ultimately hit with more expensive insurance premiums.

Zurich Connect offers one of the most comprehensive and affordable UK car insurance policies on the market. Its Standard Cover gives you Third Party liability plus cover for damage to your vehicle (sustained in an accident, by malicious damage, fire, theft or attempted theft).

Zurich Connect also offers breakdown and home call services - from as little as 60p per week.

*The ABI survey of 3,031 adults was conducted by YouGov Financial Services between 12-15 June 2009.