20 May 2012
News Categories
Business
Financial
Food and Drink
Healthcare
Manufacturing
Property
Shopping
Technology
14 January 2011
Insurers must not ignore the risk of staged and contrived accidents warns Keoghs
Statistics from the leading counter-fraud firm
Keoghs show that the biggest fraud risk that motor insurers face is from policyholders staging or inventing road accidents to file fraudulent claims.
This type of fraud – where the policyholder colludes with a third party to stage an accident, or invents an incident then damages their vehicle to validate the claim – accounted for nearly 50% of the firm’s motor fraud instructions in the last 12 months.
Comparatively, so-called crash for cash fraud – where an innocent policyholder is induced to collide with a fraudster’s car – represented only six per cent of fraudulent claims handled by Keoghs, potentially surprising given the media exposure that this type of fraud receives.
James Heath, head of counter-fraud strategy at Keoghs, said: “It may surprise some people that crash for cash fraud accounts for such a small proportion of the total volume of motor fraud investigated by insurers, and this is partly due to the efforts insurers have made in publicising this type of scam.
“While this is understandable – induced accidents put members of the public at serious risk – it is important that insurers don’t neglect other forms of fraud, which pose a much greater economic risk.
“Staged and contrived accidents are still the insurance industry’s main fraud headache, particularly for smaller insurers – for whom the scam can account for 62% of their suspect claims volumes. This is because in order to survive and grow, many of these insurers are specifically targeting high-risk niche areas of business and offering low-cost, online-only deals.
“Fraudsters who are setting up policies purely for the purpose of making claims are looking for the cheapest possible deal, and will actively target smaller insurers as they perceive that their resources for detecting and preventing fraud are limited.”
“In order to tackle this threat, smaller insurers must ensure that they have a clear fraud strategy and invest in robust counter-fraud processes. They must also work in partnership with the rest of the industry through bodies like the IFB and IFIG to ensure that they harness the counter-fraud knowledge of the majority of the insurance industry.”
Keoghs show that the biggest fraud risk that motor insurers face is from policyholders staging or inventing road accidents to file fraudulent claims.
This type of fraud – where the policyholder colludes with a third party to stage an accident, or invents an incident then damages their vehicle to validate the claim – accounted for nearly 50% of the firm’s motor fraud instructions in the last 12 months.
Comparatively, so-called crash for cash fraud – where an innocent policyholder is induced to collide with a fraudster’s car – represented only six per cent of fraudulent claims handled by Keoghs, potentially surprising given the media exposure that this type of fraud receives.
James Heath, head of counter-fraud strategy at Keoghs, said: “It may surprise some people that crash for cash fraud accounts for such a small proportion of the total volume of motor fraud investigated by insurers, and this is partly due to the efforts insurers have made in publicising this type of scam.
“While this is understandable – induced accidents put members of the public at serious risk – it is important that insurers don’t neglect other forms of fraud, which pose a much greater economic risk.
“Staged and contrived accidents are still the insurance industry’s main fraud headache, particularly for smaller insurers – for whom the scam can account for 62% of their suspect claims volumes. This is because in order to survive and grow, many of these insurers are specifically targeting high-risk niche areas of business and offering low-cost, online-only deals.
“Fraudsters who are setting up policies purely for the purpose of making claims are looking for the cheapest possible deal, and will actively target smaller insurers as they perceive that their resources for detecting and preventing fraud are limited.”
“In order to tackle this threat, smaller insurers must ensure that they have a clear fraud strategy and invest in robust counter-fraud processes. They must also work in partnership with the rest of the industry through bodies like the IFB and IFIG to ensure that they harness the counter-fraud knowledge of the majority of the insurance industry.”
Notes to editors
Keoghs Counter-Fraud Services division currently represent insurer clients with a combined motor insurance market share in excess of 65%.Keoghs looked at the last 12 months of motor fraud instructions from its clients by type of fraud. The results across Keoghs entire book were as follows:
• 48% - Staged / Contrived (policyholder colludes with a third party to stage a genuine accident, or to claim an accident has occurred and intentionally damage their vehicle to support their claim)
• 16% - Fraud Rings (a series of 6 or more claims that can be connected - usually by the perpetrators making the claims, or individuals assisting in bringing the series of claims)
• 13% - Low Speed Impacts (the value of the claim / extent of any injury suffered is suspected to be exaggerated or fabricated due to the very low speed at which the collision occurred)
• 9% - Exaggerated Loss (claimant attempts to inflate the value of their claim by exaggerating the extent of their loss)
• 8% - Bogus Passenger (following a genuine accident, personal injury claims are entered for people who were not in the vehicle)
• 6% - Induced Accidents (i.e. a 3rd party induces an innocent policyholder to crash into them and brings a claim)
Keoghs also divided the results by small, medium and large insurers:
• Small – A reported 2008 motor Gross Written Premium (GWP) of up to £150m
• Medium - A reported 2008 motor GWP of between £150m and £450m
• Large - A reported 2008 motor GWP of over £450m
The key finding of splitting the data this way was that for smaller insurers, staged and contrived claims accounted for 62% of fraudulent claims.
This story also appeared in:
Post magazine Back to top | More Keoghs stories
