08 Sep 2005

Insurance fraud in the UK business community costs at least £550 million a year, according to a groundbreaking study released today (8 September).

The independent research, recently undertaken by MORI, was commissioned by a syndicate of leading insurance-related organisations comprising: Association of British Insurers; Capita Insurance Services; Cunningham Lindsey UK; Davies Arnold Cooper Solicitors; NIG; Royal & SunAlliance; and Zurich.

The survey highlights the need for insurers, industry partners and customers to work together - as firms are as likely to be victims as the perpetrators of fraud. The key findings of the research were:

• Up to 1 in 7 claims made by businesses are exaggerated
  
• One in 3 of the UK’s biggest firms supplied false information on insurance proposal forms
  
• One in 12 firms believed exaggerating a property or motor insurance claim was acceptable – with smaller businesses most likely to regard it acceptable.

But the survey also found that companies were as likely to be the victims of fraud, finding that over the last two years:

• One in 10 companies had been the target of a false claim for compensation by a member of the public; and
  
•  Two in 3 larger firms were subject to a fraudulent compensation claim.
  
•  One fifth of employees are aware of someone exaggerating a genuine illness or injury.

This research shows that there is still work to be done in changing the perception that fraud pays, or that it is an 'acceptable' crime. The industry therefore needs to dispel such myths and intensify anti-fraud and customer relations initiatives, such as:

• Using databases effectively? The industry is making better use of its databases, allowing them to be cross-referenced against one another to ensure that criminals cannot move easily from one product to another.
  
• Working closely with industry?Insurers are engaging with the Federation of Small Businesses and the CBI to explore some of the common pitfalls that can often lead to fraud, as well as to better understand the business conditions facing clients.
  
•  Improving risk management?Insurers can play an invaluable role in helping firms understand and manage their exposure to risk. Better risk management can not only cut down fraud, but can also reduce premiums for companies.

Commenting on MORI’s findings:

Dermot Joyce, Executive Director from Capita Insurance Services, said: “This is the first research of its kind and the messages are stark – the £550m price tag and the fact that 15% of claims are exaggerated highlight the challenge we face as an industry. Fraud is not a victimless crime: it pushes up the cost of insurance for everyone, and we know this hits smaller firms particularly hard. We have to protect honest policyholders, as far as possible, from unnecessary rises in premiums.”

John Freeman, from Capita Insurance Services, said: “Insurance companies take fraud very seriously. But it is clear that a minority of companies do not regard their behaviour as criminal. Fraudsters need to know that, at best, their actions may void their policy, and at worst they risk prosecution and becoming uninsurable. This research gives us some invaluable information on the types of fraud and the nature of the risk, making the problem easier to tackle.”