Organised gangs and chancers drive up insurance fraud detection rates by 10%

Insurance claims tainted with fraud grew by 10% in 2020 during the height of the pandemic, leading UK insurer Aviva has found.

Aviva uncovered more than 12,000 instances of claims fraud in 2020, worth more than £113 million. That’s more than 19,000 claims under investigation and amounts to 33 a day – more than one every hour.

Whiplash fraud continues

Despite a fall in traffic volumes through multiple lockdowns, the proportion of fraud detected on motor injury claims grew by 20%. Whiplash fraud continues to represent the majority of detected fraud, accounting for 60% of all claims fraud detected. Over three-quarters of the motor insurance claims fraud Aviva detected was committed by third parties (i.e., not Aviva’s customers), and approximately 15% of motor claims fraud was linked to organised fraud activity.

The increase in detected whiplash fraud underlines the serious need for the new Whiplash Reforms called for by Aviva, which came into effect on May 31, 2021. These will reduce the disproportionate compensation and fees in the system, strike at the root cause of whiplash fraud, and help to keep premiums low for genuine customers. Motor injury fraud is different than other forms of fraud in that it puts the public’s personal safety at risk through induced accidents such as crash for cash, and diverts scarce public services – including the NHS, ambulance, police and GPs – from where they are needed most.

Policy Fraud & Ghost Broking

Additionally, Aviva identified fraud on more than 29,000 motor policy applications, up by 34% on Aviva’s 2019 figures. Ghost Broking now represents approximately 20% of policy fraud, and is when an unauthorised person acts as an insurance intermediary fraudulently taking out motor insurance policies, often for a fee. Ghost brokers typically target vulnerable customer groups, such as non-English speaking communities and young drivers who face higher premiums. Aviva has a dedicated team focused on the problem and helping genuine customers, and has invested in technologies to improve prevention and detection.

Ghost Broking continues to present a significant threat to customers, both in terms of exploiting some innocent customer groups, potentially leaving them with worthless policies – essentially uninsured – but also by increasing the cost of motor premiums for honest customers.

Customers should be cautious of insurance offers from unclear, unsolicited or unusual sources, including online messaging platforms. If customers have any concerns about the legitimacy of an insurance offer, they can check the broker’s status on the Financial Conduct Authority or British Insurance Brokers’ Association websites, or alternatively contact the insurer directly. If any Aviva customers have any concerns they can let us know via Aviva’s Fraud Hub. Ultimately, if a premium looks “too good to be true”, then it probably is.

Slips, Trips and Falls

Frauds committed against businesses’ employers liability and public liability insurance policies grew slightly, with the proportion of detected fraud up 5% on 2019 figures. Among the most common of these claims (one in four liability claims) are ‘slip and trips’. In some instances, fraudsters have tried to capitalise on the safety measures that businesses have put in place to prevent the spread of Covid-19. As an example, Aviva has identified multiple bogus injury claims stemming from a fall due to hand sanitiser on the floor. 

Property Fraud

The proportion of home insurance claims that were rejected for fraud grew by 26% in 2020. Home insurance fraud detection is a priority focus for Aviva in 2021 and the insurer expects to see the number of claims rejected for fraud continue to rise .

The most common types of detected fraud were bogus claims for accidental damage, accidental loss and theft. The average value for a fraudulent household insurance claim was £1,650. The most common fraudulently claimed items are mostly technology gadgets:

1. Mobile phones
2. Televisions
3. Jewellery
4. Laptops
5. Tablets                      

David Lovely, Claims Director, GI, said, “The recessionary factors caused by COVID-19 have arguably created the biggest fraud threat to customers in a generation. Currently, government intervention is mitigating many of these financial impacts, but unfortunately we expect to see significantly more fraud in the coming year.

“Policy fraud, such as ghost broking, is one area in particular where believe we will see increases in attempted fraud, as people misrepresent policies to access cheaper premiums. As households and businesses come under increased financial stress, we expect to see more claims fraud, especially on home, small business and liability policies.

“The good news is that whilst we expect to see more fraud, we broadly expect it to be more of the same types of fraud, and we believe our existing controls will continue to respond very well. However, we remain vigilant for new types or methods of fraud, and are continuing to invest in strengthening our fraud controls over the next two years – to protect genuine customers from the impact of fraud, and to keep premiums low.”

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