Guarding against home insurance fraud

Insurance fraud adds, on average, £50 to the annual insurance bill for every UK policyholder, according to the Association of British Insurers (ABI). In fact, ABI figures show that in 2016, insurers detected 125,000 dishonest insurance claims valued at £1.3 billion. Of these, bogus or exaggerated home insurance claims make up the largest proportion of frauds.

Of course, a lot of fraud is committed by criminal gangs – ABI figures show there were 15,000 ‘organised’ frauds, valued at £174 million, in 2016. But the great majority of fraud cases are committed by ‘opportunists’ – people who might otherwise be law abiding citizens who see an opportunity to over-inflate their claim or provide false information in order to get more money. Many of these perhaps aren’t aware that they’re actually committing a crime. So what can you do to ensure you don’t inadvertently commit insurance fraud?

What is insurance fraud? 

The Oxford English Dictionary defines fraud as a “wrongful or criminal deception intended to result in financial or personal gain.” The ABI states that “insurance fraud is when someone invents or exaggerates a claim, or does not tell the truth in order to obtain cheaper cover. It is a serious crime which can result in a criminal conviction and even imprisonment.”

The Fraud Act

The Fraud Act 2006 deems that a person would be guilty of fraud if they were found to have committed any of the following:

  • Fraud by false representation – dishonestly making a false representation and intending to either make a gain or cause loss to another
  • Fraud by failure to disclose information – dishonestly failing to disclose information which legally must be disclosed and intending to either make a gain or cause a loss to another
  • Fraud by abuse of position – dishonestly abusing a position of trust and intending to either make a gain or cause a loss to another

If you knowingly withhold information or volunteer information that is not true, knowing that you might gain or that another person or entity might suffer loss, you would be guilty of fraud.

Common types of property related fraud

Among the more obvious types of fraud that relate to property are staged fires and false claims around burglary or robbery, whereby items that weren’t affected or stolen are falsely added into a claim.

Less obvious types of fraud include:

  • Failure to disclose previous claims

  • Submitting false details - for example, don’t underestimate the value of your possessions or exaggerate any security measures to obtain a lower insurance premium.

  • Adding items to a genuine claim – don’t include things that were not damaged in a flood, fire, storm or other type of claim. Similarly, don’t include damage that was already present at the time of an incident.

  • Increasing the value of an item or exaggerating the extent of the damage

  • Fraudulent accidental damage - deliberately damaging electrical items or furnishings and then trying to make a claim.

It’s easy to think some of these exaggerations won’t hurt but if you try to make a claim for something that hasn’t been affected or you give false information, even inadvertently, you are committing fraud. Doing so adds to the huge bill insurers pay for tackling fraud and, of course, increases policy premiums for everyone – the insurance industry currently invests around £200 million a year to tackle insurance fraud.

The consequences of insurance fraud

At the very least, withholding information or submitting inaccurate claims can render your insurance policy invalid. Your insurer can also retain the premium paid and seek to recover previous claims paid out.

If you are found guilty of insurance fraud, you may be listed on the Insurance Fraud Register, which will make it almost impossible to get insurance of any type in the future. It might also affect your future job prospects or your ability to access other financial products such as credit cards or mortgages. You may end up with a criminal conviction or even face imprisonment. Is it really worth the risk?

The impact of insurance fraud

Insurance fraud directly affects honest policyholders – a great deal of the population – who end up with higher premiums because the cost of detecting and dealing with fraud is passed onto insurers’ customers. It also affects society in general when public resources, such as the courts, the NHS and the police spend valuable time and money dealing with fraud cases.

Detecting fraud

With such high levels of fraud, insurance companies use a variety of tools to detect when a claim is potentially fraudulent. They’ll use a combination of technology and common sense when assessing a claim and if something doesn’t stack up, they’ll investigate for potential fraud.

Gaps in insurance history, a higher number of claims than usual, policy or document alterations, lifestyle or other circumstances incompatible with your claim are all red flags and may lead to an investigation. Insurers may look you up on social media, for example, to check you are being truthful.

Insurers also share information on claims details and help to fund a number of industry initiatives such as the Insurance Fraud Register and the Insurance Fraud Bureau.

Reporting insurance fraud

As we’ve seen, insurance fraud is a significant problem for the insurance industry and impacts prices for honest customers. Of course, insurers remain committed to providing excellent service and paying all genuine claims as quickly as possible.

James Dalton, ABI’s Director of General Insurance Policy, says: “The vast majority of insurance claims are genuine, with millions being paid to customers every day. The industry does everything it can to keep premiums down and tackling fraud, which drives up prices for honest customers, is at the heart of that.”

If you suspect someone of fraud, you can help identify them and tackle the problem by reporting them to the Insurance Fraud Bureau (IFB) Cheatline by calling 0800 422 0421 or by filling out a form on the IFB’s website.

For more information on insurance cover and how we can help with building insurance repairs, email us at info@sarrani.com or call us on 020 3006 3126.