4 Fraud |
38. The National Fraud Authority estimates that
the insurance industry loses £2.1 billion per annum to fraud.
The Association of British Insurers told us that £930 million
of motor insurance fraud went undetected each year, adding £39
to the cost of every premium.
Some estimates of undetected fraud are higher and motor insurance
also accounts for a proportion of the detected insurance fraud
which the ABI estimates adds £44 to every household's total
insurance costs each year.
39. Fraud takes a number of forms. Moneysupermarket.com
informed us of research showing that 41% of parents claim to be
the main drivers of cars actually driven for the most part by
The MIB said that 17% of consumers under-declared driving licence
data, such as penalty points, to their insurers.
The British Insurers Brokers Association said:
some comparison websites prompt people to get cheaper
premiums by making changes to their proposal and some personal
finance websites such as 'Money Saving Expert' have even encouraged
people to change their job title to seek a lower quote ... It
is far easier for a customer to lie or fail to include a fact
on a comparison website that makes assumptions about people and
does not even ask them all the questions directly.
40. We also received worrying evidence about the
scale of organised motor insurance fraud. The Association of Chief
Police Officers referred to there being 30,000 staged accidents
in 2009 and explained in some detail how such accidents are arranged
to enable claims to be made. For example, Deputy Chief Constable
I can give you an example without going into specific
details where they set up their own claims management company.
They have a doctor who could be a member of the family. On the
legal side, a solicitor could be a member of the family. The victim
of the collision is also part of that organised crime group, as
well as the offender being part of the organised crime group.
The entire incident is contained within a group who are well known,
and often related, to each other. ... Others are staged collisions,
and then there are collisions that are fictional. There is an
audit trail of the collision having occurred and there is a vehicle.
All the main players are there but, actually, a collision never
did occur. It is quite varied in its nature, but it's very highly
organised and clearly very profitable, but it is a high-risk activity.
DCC Ainsworth also said that it was lucky that there
had not yet been fatalities as a result of staged crashes.
Saga claimed that some claims management firms encouraged fraud
and that there was evidence of "sophisticated fraud rings"
The ABI concluded that fraud was a "growing problem"
but this was disputed by MASS.
41. Whether or not insurance fraud is a growing problem,
it is a criminal activity which adds to the costs borne by drivers
and may in some cases cause injuries or even deaths. We were surprised,
therefore, to hear some witnesses suggest that the insurance industry
was not doing enough to combat fraud. Mark Boleat, for example,
It is surprising that insurers have not spent rather
more money dealing with the problem [of fraud]. However, ultimately
they do not meet most of the cost. Given that motor insurance
is, to some extent, a compulsory product it makes little difference
to insurance companies collectively whether fraud puts £10
or £50 on the cost of the average premium; it matters rather
more to their customers.
The Credit Hire Organisation complained of "continual
frustration in ... attempts to work with the insurance industry
to identify and deal with suspect claims" and, similarly,
the European Vehicle Secure Alliance (EVSA) said the insurers
had shown a "disappointing reluctance to adopt a broad and
collaborative approach to reducing vehicle related crime and disorder".
42. Will Thomas of Confused.com said his firm took
on good faith the information which was provided by customers
seeking premiums although he recognised that more could be done
to check for misrepresentation.
Duncan Anderson said "detecting with accuracy suspicious
behaviour on a website is not trivial". In his view, this
was an area insurers took seriously but "there is probably
more that can be done".
The ABI refuted the suggestion that the industry was reluctant
to tackle fraud, arguing that "our members are investing
more resources in detecting fraud than ever before".
A number of witnesses called for more information sharing between
the DVLA and the insurers to verify information provided by drivers.
The Minister said a detailed plan to enable such information sharing
to occur would be in place "certainly within six months".
the Government's aim to ensure that insurers can gain access to
information held by the DVLA about drivers when insurance is being
arranged. We recommend that, in reply to this Report, the Government
should specify more precisely when the new data sharing arrangements
will be introduced.
43. Mark Boleat proposed that the insurance industry
should fund a dedicated police unit aimed at tackling insurance
fraud, modelled on the City of London Police's Cheque and Plastic
Card Unit, which is funded by the banks. He said that "productive
discussions" on the establishment of such a unit had begun.
 EVSA gave
examples of similar initiatives elsewhere in Europe.
DCC Ainsworth of ACPO spoke of both capacity and capability constraints
on effective police action against insurance fraud. He argued
that "we could work more collaboratively with the insurance
The Minister said "in DVLA we already had embedded police
working with us on fraud" and agreed that he would discuss
"closer working" with the insurers.
In relation to the proposal to establish a dedicated police unit,
Mr Penning said "that is something that has been pointed
out to me literally in the last couple of days that we will look
44. There appears
to be significant scope for the insurance industry to do much
more to combat motor insurance fraud. We call on the main players
in the industryparticularly the insurance firms, brokers
and comparison websitesto work together more proactively
to achieve this. In particular, we welcome the initiative to establish
a dedicated police unit on insurance fraud, paid for by the industry.
We note the Minister's commitment to look at this proposal: he
has a responsibility to law-abiding drivers to ensure that fraud
is taken seriously by the industry and minimised. We recommend
that, in reply to this Report, he update us on progress in discussions
on this issue and on the action the Government has taken to assist
in ensuring that a successful outcome is achieved, preferably
by the start of the 2012-13 financial year.
102 National Fraud Indicator for 2011. Back
Ev 52 paragraph 3.11. Back
Ev 61, 63 paragraphs 2.4.2 and 4.3.1 and see Ev 43 paragraph 9
and Ev 48 paragraph 2.21 for other estimates. Back
Ev w5-6 paragraphs 2.2 and 3.4. Back
Q94. BIBA said 23% of endorsements were wrongly declared, Q95
and Aviva said one in six consumers misrepresent their conviction
history, Ev w26 paragraph 3.2. Back
Ev 70 paragraph 2.15. Back
Ev 86 and Qq 166 and 168, Ev 55 paragraph 3.5.1 (on hotspots),
Ev 63 paragraph 4.3.2, Ev w5 paragraph 2.2 and Ev w30-31 section
Ev w18 paragraph 16. Back
Ev 52 paragraph 3.11. Back
Ev 84 paragraph 6. Back
Ev 74 and Ev 78 paragraph 6.1. Back
Ev 54. Back
Q188, Ev 52 paragraph 3.12, Ev 63 paragraph 4.3.3, Ev 72 paragraph
3.15, Ev w26 paragraph 3.2 and Ev w36 paragraph 4.2.3. Back
Qq 265-66, 274, 288 and Ev 88. Back
Ev 84 paragraphs 7-9 and see Q184. Back
Ev 74-75 and Q185. Back