How rising motor fraud is driving up your car insurance costs again

New figures released by Aviva reveal that insurance fraud increased by 19% in 2013.

Insurer Aviva has revealed that it detected over £110 million worth of insurance fraud in 2013, which is a 19% increase on the previous year. On average, 45 claims per day worth around £300,000 were found to be fraudulent.

The most common type of fraud was motor injury fraud, accounting for over half (54%) of Aviva's costs for fraudulent claims. And over half of this number were organised ‘cash for crash’ claims.

What is ‘cash for crash’?

‘Cash for crash’ is the term for an accident which has been pre-arranged with the specific aim of claiming compensation from insurance companies for damaged vehicles and personal injury. And some of these 'crashes' are entirely fictional.

In one case in Newcastle in 2009, the occupants of a minibus supposedly travelling to Edinburgh for a stag do all ‘suffered’ whiplash injuries after their minibus supposedly collided with a car in a tunnel. However, it was later proved that the accident never actually happened. In fact, the bus had been deliberately damaged elsewhere then taken to the tunnel – the other vehicle wasn’t even at the scene, as was proved by CCTV footage.

The fraudsters tried to claim for a total of over £100,000, and their actions wasted much-needed resources. On top of the police time wasted, six ambulances attended the incident and the group were all treated at a local hospital. It’s a good example of this type of fraud’s wider cost to society. Other people's lives may even have been put at risk because numerous ambulance crews were busy looking after people who hadn’t even been in a crash.

Sixteen arrests were made, and 13 people received suspended sentences and community service, plus fines of several hundred pounds, which Aviva says was a “disappointing outcome [which] serves as little deterrent for the future.”

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A worrying trend

This type of fraud has been linked to wider gang-related criminal activity. It puts innocent drivers at risk, and has an impact on our premiums.

Tom Gardiner, Head of Fraud at Aviva, says: “Our priority is to pay genuine claims quickly and fairly while offering a great service to our customers. Last year in the UK, for example, Aviva settled over 910,000 claims worth £2.65 billion. We identified fraud on less than 1.9% of claims we received.

"However, a combination of factors including the economic climate, social attitudes toward insurance fraud as a ‘victimless crime’, and a lack of effective deterrents are increasing the frequency of insurance fraud.

"The ABI [Association of British Insurers] estimates fraud adds £50 to the cost of insurance premiums. We are witnessing a trend toward third party, injury and organised fraud. For example, in 2013, we identified fraud in one in nine third party injury claims.”

In one case, 200 whiplash claims were discovered to be part of an organised, fraudulent effort with a claim value of over £5 million. Sentences between four and seven years were handed down to the guilty fraudsters.

People's attitude to fraud

A survey found that, while nine in 10 people believe insurance fraud is unacceptable, and 64% want insurers to do more to reduce fraud, two-thirds would not report someone they knew had committed fraud to the police. Only one in 10 think they will be affected by it. However, insurance fraud leads to higher premiums than would otherwise be necessary, and people seeking 'injury' compensation cause more accidents on our roads, often distressing innocent people in the process.

The research found that 23% of people knew someone who had made an exaggerated, albeit genuine, claim, and 17% knew someone who had faked a whiplash injury to gain compensation. Nine in 10 people believed dishonesty was a problem in today’s society.

Do you think that insurers should do more to detect fraud? Are you angry that fraudulent claims are driving up innocent drivers’ premiums? Let us know your views below.

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