Insurance fraud costs the UK more than £3 billion a year and drives up premiums for all customers. How is the industry fighting back?

Where insurers would once fight fraud in isolation using their own investigation teams and data, the industry has recognised the power of collaboration.

Data sharing is a vital weapon in tackling fraud, which is why insurers are  spending in excess of £200 million a year on a collective approach, including funding for bodies such as the Insurance Fraud Bureau.

Whether it’s organised or fictitious and intentionally inflated claims, insurers will always investigate their suspicions in order to keep premiums lower for all.

Policyholder cost

They have been getting better at detecting fraud, with 130,000 identified cases in 2014 accounting for over £1.4 billion. However, it is estimated that undetected fraud still costs the wider economy another £2 billion.

That’s why fraud is not a victimless crime. The Government’s Insurance Fraud Taskforce, which is a further example of how the industry has been working together, recently put the cost to policyholders at up to £50 each.

But the desire of insurers to reduce this burden on customers is under strain after judges in the Supreme Court ruled this summer that lying on an insurance claim should not necessarily invalidate it.

Socially corrosive

Collateral lies, which are untrue but not material to the claim, can be acceptable, they said. The industry fears that this could distort and prolong the claims process through the added time and cost involved in checking for fraud.

As James Dalton, of the Association of British Insurers, said recently: “Lies are lies. Insurers will investigate all suspicious claims and we make no apology for doing so as it keeps premiums down for honest customers.”

Insurance fraud is viewed as socially corrosive because it is an opportunistic crime often undertaken by otherwise honest individuals.

Exaggeration is fraud and people need to remember they risk gaining a criminal record if they inflate their claim, invent medical treatment or claim for items that were never lost. With the industry’s collaborative approach, it may make getting insurance harder in the future as well.

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