What false insurance claims mean for you

Have you ever wondered how easy it might be to pad an insurance claim - perhaps just including an additional item that you didn’t really lose in the burglary, or putting just a little extra value onto that bracelet that went missing, along with your car?

Well, according to recent research published by the Association of British Insurers (ABI), many people not only think that making false insurance claims is an ‘acceptable crime’ but they are actually doing it, with the value of false claims detected by insurers spiralling to £480m a year, three times more than in 2003. Nor do insurers think they’ve caught the worst of it - the industry estimates that undetected fraud in the UK is costing insurers around £1.6bn a year. Worst of all, it’s not the insurance companies that bear the brunt of such costs; it’s you, the customer. Even if you’ve never so much as stolen a penny, let alone made a false/exaggerated insurance claim, the ABA has calculated that you are likely to be paying £40 more a year on your insurance premiums, just to cover these rocketing claims.

False claims over the past year are too numerous to describe in detail, but with half the fraudulent claims attributed to home insurance - for example, self-inflicted damage to carpets - it seems that the security of the home (or perhaps the lack of witnesses) is spurring many of us on to try our luck at securing a not-altogether-kosher insurance pay-out. Similarly surprising is ABA’s finding that as many as 25% of motor claims in London are thought to be fraudulent (Scotland has the lowest rate of false car claims). A recent example cited by the Financial Ombudsman involved a campervan, which the owner, Miss D, reported missing following a holiday. Although it is not normally the business of an insurance firm to look into how a policyholder has financed the purchase of a vehicle, there was enough doubt over Miss D’s ownership of the campervan to warrant investigation. On finding no trace of the seller of the campervan, and on discovering that the campervan had been written off in 1990, the firm had good cause to refuse to pay the claim. Okay, it’s unlikely that most of us would go so far as to invent a car, and then claim on it. But even if you just exaggerate the number of items you have lost through, say, theft, you might find yourself facing an unwelcome investigation; even a seemingly inconsequential exaggeration may not only invalidate your whole claim, but you may also struggle to find a firm that will agree to offer you insurance in future. For an extra few pounds, is it really worth the risk?

With insurance providers more wary than ever of false claims, in future we are likely to see an even more rigorous insurance regime, with firms keen to investigate claims that are not watertight. This may sound daunting, but the key is to ensure you’re careful with your belongings - keep receipts and evidence of ownership safe so that you can easily produce the relevant documents if you need to make a claim. If you are the victim of a theft or burglary, also ensure that you inform the police of everything you have lost as quickly as possible. This may be the last thing on your mind when you return to a car park to find your car, and all its contents, has vanished, but the sooner you make a full and accurate report of your loss, the quicker you’ll be back in the driving seat, with your insurance claim met.

Also don’t forget that insurance premiums might rise to cover the increasing number of claims. If you are buying insurance, or renewing any of your insurance policies, don’t just stick with what you know. Shop around and find the best, most cost-effective deal for your circumstances. At least then you’ll know you’re taking charge of the situation, rather than leaving your insurance options and premiums to the latest whims of the fraudsters.

**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**