Annual cost of insurance fraud estimated to be £1.6 billion

10/05/07

Fraudulent insurance claims are now costing insurers and honest customers over £4 million every day, according to figures released today by the ABI (Association of British Insurers). ABI is the trade association for Britain’s insurance industry. Its nearly 400 member companies provide over 91% of the insurance business in the UK.

Initial findings from ABI research estimate that false claims cost the industry £4m a day, adding £40 to the average premium paid by policyholders.

The ABI survey of nearly 7,000 people reveal that:

One in ten adults - 5 million people - admit to having made a fraudulent claim on a general insurance policy, such as home or motor insurance.

Opportunistic fraud carried out by individual customers alone costs over £800 million a year.

The home is the richest source for insurance cheats: around half the cost dishonest claims occur under home contents and buildings insurance.

Common types of fraudulent claims include:

Deliberate spills or cigarette burns on carpets or sofas that lead to claims for a new carpet throughout the house or new three-piece suite.

False or exaggerated claims for injury against local authorities, following trips over paving stones.

Exaggerating the value of items, such as cameras, lost or stolen while on holiday.

Nick Starling, the ABI’s Director of General Insurance and Health, said:

“Honest customers should not have pay for the cheats. Insurers are committed to reducing the fraud problem. We are devoting greater resources to weeding out the cheats, and working together to detect and combat fraud. The Insurance Fraud Bureau is already having a significant impact on tackling organised insurance fraud.

“These figures highlight that greater deterrents, such as criminal prosecutions, are needed to discourage fraud. This is why we are calling for police forces to be given more resources so that fraud can be treated with the seriousness it deserves”.