Motor vehicle Insurance fraud

Understanding motor vehicle fraud and how it can be perpetrated

UK insurers have highlighted that fraudulent claims are costing the industry millions of pounds. With Aviva citing a combination of factors including the economic climate, social attitudes toward insurance fraud as a ”victimless crime”, and a lack of effective deterrents as reasons for the increasing frequency of insurance fraud.

Worse yet, the focus on fraud in the media could be argued to have encouraged a boom in “crash for cash” fraudsters.  Aviva reported; in 2013, fraudulent ‘slam-ons’ – road traffic accidents deliberately caused in order to claim for whiplash compensation – increased by 51%.  For Aviva, this meant £110m of fake insurance claims were identified and them reporting in November 2014 that ‘50% of Aviva’s motor injury claims fraud is now organised in nature, with over 6,500 suspicious injury claims linked to known fraud rings.’

In 2014 the City of London Police reported ‘Motor insurance fraud is estimated to cost the UK insurance market over £1 billion annually. Opportunist claims are supplemented by claims orchestrated by highly organised and sophisticated criminal gangs.’

But what is motor insurance fraud and how does it affect us?

For the private motorist it is estimated fraudulent claims add up to £90 to your premium, with this obviously being more for commercial motor premiums.

Even more worrying for a commercial or fleet operator is the additional ‘iceberg effect’ of insurance claims.  The hidden costs of having a vehicle involved in a collision are far in excess of the insured cost.  Take into consideration driver sick days, loss of load, loss of delivery to customers, the cost of a temporary replacement driver, administration time etc and this figure can cost a business thousands.  We have heard of small businesses folding due to the excessive costs incurred following a road traffic incident.

Types of vehicle insurance fraud:

Contrived accidents

These can be submitting a claim for damage sustained in a collision that did not occur as the result of an accident i.e. transporting pre-damaged vehicles to an accident ‘black-spot’ to create the impression an accident has occurred.  Eg: A delivery vehicle going about it’s business then the next day the company gets a call saying one of their vehicles, reg no xx xxx reversed into the door of a parked car on xxxx road yesterday.

Induced road traffic accidents

Most commonly known as ‘cash for crash’.  The deliberately induced accident consists of organised criminals targeting innocent motorists by provoking collisions to facilitate compensation payment for this - such as injury, damages, hire vehicles, loss of earnings, recovery and storage. Commercial vehicles are particularly popular targets.

Phantom passenger claims

Opportunist and organised phantom passenger claims can arise as a result of both genuine and staged accidents. Many phantom claims feature vehicles packed with claimants, all of who claim to have been injured.  Ever heard of a minor bump that suddenly has 4 people claiming for injuries?

Staged Accidents

Depending on the complexity of the fraud, two or more individuals will deliberately crash their vehicles into each other, potentially resulting in claims for: damage caused, injuries sustained, car hire costs, vehicle recovery, storage etc.  Gangs may target hire companies for one of the vehicles to avoid using their own vehicles.  One infamous staged accident targeted a bus company where the driver and most of the passengers were in on the claim.  A car pulled out of a parking bay and the bus hit it. 

Application Fraud

A policyholder dishonestly misrepresents or fails to disclose material facts in order to lower the insurance premium. This can include non-disclosure of claims history, points on a driving licence, and/or car modifications.

Fronting

A type of application fraud where a policy is purchased using another’s details to gain more favourable terms.  Being a named driver on a policy where you are the main driver is a simple example.

Opportunistic Fraud

Opportunistic Fraud is not a ‘separate’ fraud type in the truest sense. Opportunistic frauds can be committed on all types of insurance, from motor, Employer and Public liability, property, pet or travel insurance and beyond. It consists of an individual submitting a false claim either on a single or multiple occasions. 

Professional Enablers

Professional enablers are the associated professionals e.g. solicitors, engineers, doctors and vets, who are complicit in submitting and progressing fraudulent claims, from staged accidents to fictitious personal injury claims. Other specialist service providers such as Accident Management Companies (AMCs), recovery agents and engineers also come under this umbrella.  Ever had a call from a claims management company telling you that you can claim for injuries?  Or had the opportunity to claim for injuries even though you were OK?

Internal Fraud

Employees of insurers are in the unique position of fully understanding insurance processes and the triggers which may indicate insurance fraud. This knowledge can enable them to submit fraudulent claims and remain ‘under the radar’ or aide the progress of false claims submitted by others.

Combatting motor insurance fraud

Insurers on the face of it seem to do little to combat fraudulent claims, but underneath, they have special investigation units, work closely with the Police Forces, share information and are looking at methods to stop pay outs for minor impacts where it now seems common culture for the innocent party to claim for whiplash.  The latter something that has in the past been a lucrative income for insurers referring cases onto claims management companies.

The most obvious way of avoiding fraud against you is to not be involved in a traffic incident.  Easier said than done, but a few simple steps my help:

• Keep your distance - Keeping a safe distance will reduce your risk of running into the back of somebody
• Beware of Tailgaters - By forcing you to concentrate on the car behind, the criminals will attempt to take your eyes of the car in front of you
• Always look for brake lights - Non- functioning lights can be a ploy to trap unsuspecting motorists.
• Take extra care at roundabouts or areas where there is stop-start congestion - Hectic roundabouts, especially at rush hour, can be an ideal opportunity for induced accidents.
• Beware of cars rapidly pulling out of junctions and then braking in front of you.
• Be extra aware if you are a commercial vehicle driver - Commercial vehicle owners are targeted as there is a high probability of the vehicle being fully insured and a company may be less likely to contest a claim. In 2013 the Telegraph reported 1.2 million uninsured drivers on the road.  Any gang or deliberate insurance fraudster needs to know their target is insured.  This means the vehicles with company livery and branding make easy targets.

With 1 in 3 company vehicle drivers estimated to have an insurance claim each year, any fleet should expect a potential incident.  With more and more fraud, the company will be grateful for any information that can assist in the claim.  Investing in a telematics system and /or in-vehicle camera systems will enable you to provide the insurer with irrefutable evidence for any road traffic incident, but it is even more beneficial in cases of fraudulent claims.  Camera evidence from a reputable product will be eligible for evidence in court and will easily prove fault, but also if the claim was fraudulent.  Any companies that have needed to use telematics or camera evidence after an accident will tell you that the benefits of the system far outweighs the initial cost.

RoadHawk always recommend submitting the evidence from their camera, even if you think your driver is at fault.  For one, it reduces the claims time, but more importantly in cases of fraud, an insurer may spot something you haven’t.

Camera systems such as the RoadHawk systems are probably the most effective way of combatting motor insurance fraud.  This is recognised by users and by the major insurers.