UK fraud value up since pandemic but not as much as feared by insurers: ABI

Insurance fraud in the UK has increased since the start of the global pandemic, although not by as much as initially feared, the  Association of British Insurers (ABI) has announced.

Insurance fraud is an increasing problem in the UK, with one fraudulent claim made each minute, costing over £1 billion a year.

The ABI’s figures, that apply to 2020, reveal that the number of detected fraudulent claims fell to 96,000 down 10% on 2019 to the lowest since 2007. Their value, at £1.1 billion, also fell on the previous year, but at a lower rate of 4%. This resulted in a rise in the value of the average fraud detected to £12,000, up 6% on 2019.

Meanwhile, fraud detection rates rose, both by number (up 0.02 percentage points), and by overall value (up 0.47 percentage points). This shows the level of detected fraud measured against all claims made.

Insurers detected proportionately more motor insurance fraud than in 2019, despite a fall in the overall number of motor insurance claims due to fewer vehicles on the roads during lockdowns. Detected motor frauds fell by 6% to 55,000, while their value fell by only 1% to £602 million. However, detection rates rose – by number up 0.55 percentage points to 2.05%; by value up 1.31 percentage points to 6%.

The number of property insurance frauds fell by 10% to 24,000, with their value, at £111 million, down 9%.

With fewer businesses open and people making fewer journeys during the lockdowns, the number of liability insurance frauds, at 14,300, were down 18%, with their value, at £412 million, down 6%.

Reflecting much reduced overseas travel, detected travel insurance frauds dipped. There were 770 detected scams, down 49%. However, their value, at £1.8 million, showed a 2% increase. This led to the highest ever recorded average claims value of £2,358. During the pandemic travel claims focused on cancellation and curtailment.

Mark Allen (pictured), ABI’s chief fraud and financial crime officer, said: “Insurers adapted very quickly to the unprecedented challenges of the pandemic, to protect and support their honest customers through the most difficult of times

“Reflecting significantly fewer motor insurance claims last year during the lockdowns, it is no surprise to see a fall in detected frauds last year. Also having an impact have been the various support schemes from the government to help individuals and firms cope with the financial hardship which can ordinarily lead to increased insurance fraud.

“However, the rise in fraud detection rates shows that, however difficult the circumstances, insurers will continue to do all they can to crackdown on fraud to protect their honest customers. As ’the new normal’ kicks in, the industry will remain vigilant against the fraud threat.”

Ben Fletcher, director of the Insurance Fraud Bureau (IFB), said: “The pandemic has brought unprecedented challenges for the counter-fraud sector, but thanks to the industry’s collaborative efforts insurance fraud has been prevented from rising as much as first predicted.

“Whilst we welcome this good news, we must not be complacent. The disruption caused by COVID means many people continue to face economic hardship which sadly provides fertile ground for fraud. Not only does insurance fraud push up everyone else’s premium costs, but some scams such as deliberately caused collisions can put innocent people at serious risk of harm.

“In these challenging times, it’s essential that the public continues to be vigilant and reports evidence of insurance scams to our confidential Cheatline, so we can work with the police to keep fraud down and protect consumers.”

Paul Ridge, head of Insurance, SAS UK & Ireland, said: “While figures are not as high as first anticipated, this further increase in insurance fraud revealed today by the ABI underlines the need for improved fraud detection and prevention, especially with the global pandemic resulting in more online transactions which opens up more possibilities for fraudsters. More policyholders are now happy to interact with their insurer digitally and, over time, we would expect this trend to continue.

“We have been working with The Insurance Fraud Bureau (IFB) to evolve the data sharing capability for the insurance industry through a combined technology platform, which hosts confirmed fraud and suspected fraud data.  Having the service on the same platform will enhance the efficiency of the fraud investigation and prevention services provided to the UK insurance industry, where users can share, analyse, monitor and investigate suspect intelligence data in real-time.

“The need for advanced analytics technology is key to ensure fraud is effectively tackled, while at the same time not damaging the customer experience due to multiple, time-consuming processes to check the validity of transactions.”

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