Insurance fraud soared to record levels last year as the economic downturn sparked an increase in spurious claims, according to new figures.

The Association of British Insurers (ABI) said a total of 107,200 claims worth £730 million were found to be false in 2008 while the number of claims was up 17%, with their value soaring more than 30% compared to 2007's sum of £560 million. The figures are the highest since the ABI started collecting the data in 2004.

The rise was attributed to the recession, with more people looking to fraud as a way of obtaining easy money.

Nick Starling, director of general insurance and health at the ABI, said yesterday that evidence from previous downturns indicated that fraudulent behaviour rose in difficult economic times.

With this in mind, insurers have been clamping down on insurance cheats. Starling explained: "Fraud adds an extra £40 a year to the average premium, which is why the harder we make it for the cheats, the more competitive premiums will be for honest customers.

"Cheating on your insurance really does not pay – you will get caught, future insurance will be more expensive and, along with credit, harder to obtain."

One motorist reported his car as stolen but later admitted he had pushed it over a cliff. The claimant planned to use the payout to clear debts.

The ABI said a woman claimed for a lost engagement ring the day after she extended her home insurance to include items lost outside her home.

And a man on holiday in West Africa claimed for "recovery expenses". This was turned down as it included services at a local brothel.

A survey carried out for the trade body also found that a fifth of people would not rule out making a fraudulent claim in the future.

False claims were most common in the home insurance sector, with 55,000 false or exaggerated applications detected last year worth a total of £110 million.

Meanwhile, fraudulent motor insurance claims were the highest by value last year, worth £360 million and numbering 35,300.

Of the remaining cases, there were 9,800 fraudulent commercial insurance claims, with a total value of £240m; 4,300 were made on travel insurance policies, to a value of £5m; and 2,500 were made on creditor insurance plans, worth £19m.

About 4 % of all claims, by value, were fraudulent, compared with 3% the previous year.

Separate research commissioned by the ABI found that one in five people would consider making a fraudulent insurance claim in the future, despite the threat of a criminal conviction or being unable to secure insurance subsequently.