Farcical claims no laughing matter

The infamous story of the “canoe fraud couple” grabbed headlines in the UK when back-from-the-dead canoeist John Darwin walked into a police station and admitted his and his wife’s deception.

Facing money problems, the couple had staged Darwin’s death in a canoeing accident in order to claim on his life insurance, pension and mortgage cover. Both received jail sentences.

It is a well-known fact that the incidence of fraud – including general insurance fraud – climbs during a recession or economic downturn. This is a burden for insurers and customers alike as it can lead to higher premiums.

In the UK, the insurance industry is uncovering an average of 335 fraudulent claims worth £2.3mn every day, according to figures from the Association of British Insurers (ABI). Fraud is most prevalent in home insurance claims, with around 170 false claims found each day.

And claims fraud is an international condition. Insurance companies around the world are reporting a higher number of bogus claims from cash-strapped motorists, homeowners and other con artists.

In the US, the Insurance Information Institute estimates that fraud accounts for about ten percent of the property casualty insurance industry’s losses each year.

Up to 85,000 questionable claims were referred to the National Insurance Crime Bureau in 2009, about 10,000 more than in 2008. The largest number of suspicious claims in 2009 was in the staged and caused accidents category.

In Canada, organised insurance crime costs insurers and policyholders around $542mn annually, according to the Insurance Bureau of Canada.

Web of lies

Some attempts to generate or inflate claims payments are so audacious they have entered the “Insurance Fraud Hall of Shame”.

In the US, the Coalition against Insurance Fraud has released its list for 2010 which includes a murderous step-dad and deadly arsonist among other schemers.

With consumer tolerance for insurance fraud rising in recent years, the Coalition’s decision to name and shame is an attempt to put “a human face on an $80bn annual crime that many consumers view as a victimless white-collar prank”.

Uneven streets and pavements seem to theme in a number of brazen personal injury claims. One man claimed he had fractured his hand after falling over a pothole in the street. He had actually been injured after punching a wall during a domestic dispute.

Another tried to lodge an insurance claim for a head injury, which he said had occurred after falling over loose paving when it transpired he had really been hit by a baseball bat during a fight.

And a young woman blamed a loose pavement for her injuries, when she had got them jumping down a flight of stairs while running away from security guards on suspicion of shoplifting.

In the US, a middle-aged woman claimed she had suffered injuries which left her “totally disabled”, forcing her to leave her teaching position. However, she was subsequently arrested for accepting workers’ compensation benefits while working at a youth sports camp.

Then there are the bogus motor insurance claims, including the man who pushed his car off a cliff in an effort to claim under his policy.

Another policyholder tried to claim for extensive damage to his car when it crashed during a race at the Nurburgring race track in Germany. He shipped the vehicle back to the UK, claiming the damage had occurred in a road accident there.

In California, a man was charged with fraud after his “stolen” car was found in a storage facility. The crime would have remained undetected had he kept up his rental charges for the facility where the Acura Integra was being hidden.

According to the Insurance Research Council, around one in every five motor insurance claims in the New York City area contains elements of fraud while as many as one in three appear to be inflated.

Fighting the fraudsters

With fraud on the rise, insurance companies are investing more and more in detection methods and technology. This is starting to pay off with a growing number of dishonest insurance claims uncovered – up to 2,000 each week by the end of 2009, worth more than £16mn, reveals the ABI.

“Reducing fraud remains an ongoing battle for the insurance industry,” says Nick Starling, the ABI’s director of general insurance and health. “Our honest customers rightly object to having to pay higher premiums to subsidise the fraudulent minority, which is why insurers continue to up their game in the war on the cheats.”
 
“Whether claiming against a third party for bogus personal injury or on their own insurance, fraudsters are more likely than ever to get caught, leading to more expensive and harder to obtain insurance and credit, and the possibility of a criminal record.”

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