Insurance Companies In Major Crackdown On Fraudulent Claims

Recent changes to the personal injury claim system seem to have prompted UK insurance companies to invest more heavily in claims investigation teams. This is a critical time for the personal injury claims market which will change dramatically over the next few months. We will see a cap on small claims, changes to the legal aid system and more claims will now be heard in the Small Claims Court. Feedback from insurance companies such as Aviva has been encouraging but also alarming with the amount of suspected insurance fraud still growing in some areas.

Fraud Rings On The Radar

Despite a clampdown on personal injury claim compensation figures, Aviva, one of the UK’s leading insurance companies, announced the findings of a recent survey which do not make good reading. During 2016 Aviva is said to have detected £85 million worth of insurance fraud which equates to just over £230,000 of fraudulent claims per day. While the vast majority of these claims were from third parties, not customers of Aviva, it does highlight the growing challenge to the insurance companies.

In years gone by a simple bump, whiplash claim and a compensation payment would very quickly have gone through the courts if not settled out of court. This was personal injury claim fraud at its most basic but unfortunately the criminals have become far more structured and organised. There are now whole gangs of fraudsters out there each of which plays a role in the “accident” on which they will make a claim. They have also become greedier with not only compensation claims but also additional charges further down the line for connected third parties such as garages.

Whiplash Fraud

Despite the fact that the government and the industry have tried to crack down on fraudulent whiplash claims this is proving to be a great challenge. Aviva has recently confirmed that whiplash is the major concern when it comes to bodily injury claims. Indeed whiplash is said to account for 59% of fraudulent claims in this market with the company said to be currently investigating 16,000 suspicious bodily injury claims. A staggering £25 million worth of fraudulent claims was declined by Aviva in 2016 with ongoing investigations in relation to 3000 suspicious whiplash claims directly connected to organised fraud.

One of the problems with whiplash is that this is not only connected with criminal rings but many of the general public have been encouraged to pursue such claims by unscrupulous advisers. Those who think that “I’m only claiming back my insurance premiums” could be in for a shock because fraudulent claims are illegal and could result in legal action.

Employer Claims

One area of fraudulent activity which has seen a significant increase in recent months is claims against employer liability/ public liability policies. Again, many people see this is an area where there are “no victims” if they exaggerate an injury or distress in order to pursue a claim. The truth is that insurance companies have been working together for some time now to try and identify those pursuing fraudulent claims. While the vast majority of these claims relate to criminal rings there is also an issue with individual employee claims against their employers.

Aviva alone is said to be investigating 1000 suspect employer liability claims which when replicated across the industry will be a significantly larger figure. It would appear that the fraudsters are now moving on to employer liability claims as the insurance industry works together to clamp down on “crash for cash” which for many years was the go to incident for fraudulent activity. As we touched on above, the regular use of garages and legal advisers by criminal gangs proved to be an interesting indicator of potential fraudulent activity. In cases where Aviva has suspected foul play many claims have been rejected or placed under investigation.

If you’re perfectly legal claim had been rejected or placed under investigation by your insurance company surely you would have taken legal action? Therefore, where such claims have been “dropped” we can only assume that they were either borderline cases or there was fraudulent activity involved.

Impact On Premiums

The UK government recently announced changes to the personal injury claim system, which they believe will be cost-neutral, although the insurance companies do not seem to see things this way. Many are now expecting an increase in premiums in the short to medium term as insurance companies focus on the change in the Ogden rate, the interest rate used to calculate long-term insurance payouts, as opposed to changes at the small claims end of the market. It is unfortunate but it does look as though the UK government has given insurance companies the upper hand in the short to medium term amid confusion and frustration in the marketplace.

The reality is that while governments of the day can attempt to manipulate free markets, and in this case often reduce the burden on taxpayers, the companies which operate in these markets still have effective control. There is also no guarantee that the recent changes by the UK government will have a material impact on fraudulent claims activity. Will the fraudsters simply move on to larger claims, as has been suggested with the employer liability sector, or will they sit back and wait for the next weakness to emerge?

Staying One Step Ahead Of The Fraudsters

There is no doubt that insurance companies across the UK have invested significantly in investigation teams looking at potentially fraudulent claims. There are now numerous TV programmes highlighting the issue of fraudulent claims which some in the industry hope will catch the attention of the general public and reduce illegal activity going forward. Indeed, it is interesting to see that many members of the general public making “borderline claims” often buckle under intense questioning from insurance company investigators. Even though it is the organised fraudsters who are causing the most damage to the industry, the more money that can be saved the better for all concerned.

Educating The Wider Public

There is no doubt there has been progress made in tackling personal injury claims fraud but in reality, there needs to be further education of the general public. Many people still feel that small claims, which are in reality fraudulent, “harm nobody” and simply reduce the profits of the big insurance companies. In real life, it is very different because fraudulent claims have increased insurance premiums over the years with motor insurance the hardest hit.

Perhaps if insurance companies make clear why they are increasing their premiums, partly because of fraudulent activity, then the wider public might understand more about the challenges they face. The reality is that fraudulent claims that “harm nobody” are in fact illegal and cost law-abiding insurance customers money in increased premiums. So, a double whammy of educating the wider public on the way in which the insurance business works and using specific investigation teams to challenge potentially fraudulent activity from criminal rings should help all parties in the end.