Insurance cheats are playing with fire

Gary Little MS blog

The University of Portsmouth recently issued a study identifying individuals who are most likely to defraud their household insurer. The findings make for some interesting reading.

The report analyses about 40,000 claims handled by VFM Services, a fraud investigation service.

The study reveals that the typical household fraudster is equally likely to be male or female, usually between the ages of 31 and 50, never made a false claim before and is most likely to claim for £500 or less after accidental damage to a computer, television or mobile phone. It concludes that fraudulent insurance claims are seen by many as ‘only a little bit dishonest.’

Of course, this doesn’t mean that we should automatically reject a claim from a 40-year-old woman who’s just dropped her laptop simply because she fits the profile. But it does provide some insight that could help insurers and intermediaries alike clamp down on this major industry challenge.

As long as the person on the street thinks that it’s acceptable to exaggerate a claim by adding a few items to a genuine incident, or stage an ‘accident’ in order to get a new television, then fraudulent claims will keep rolling in.

It’s clear that some policyholders aren’t considering the serious consequences that could result from making a fraudulent claim. Discovery of fraud could not only leave a homeowner with an invalid policy, but could result in criminal charges. Reports like this one highlight the fact that insurance fraud is not confined to the organised criminal. As the problem becomes more prevalent, insurers are increasingly likely to take action against those ‘everyday’ policyholders who think they can get away with a deceptive claim.

The message is clear for intermediaries who have a duty of care to their clients. As the austere economic climate continues , the temptation to ‘embellish claims’ is likely to increase. It’s critical that intermediaries inform their clients that being a “little bit dishonest “with their insurance policy may not only be fraudulent but could also be a dangerous move.