The punishment for insurance fraud in the UK is severe, yet false claims are a growing issue that continues to impact our country.
According to Aviva, a leading UK insurer, fraudulent claims across the UK rose by 13% in 2021.
This activity not only comes at a cost to those who have been defrauded—it has much wider implications. It was reported by The Association of British Insurers (ABI) that fraudulent insurance claims cost the UK economy £1.2bn.
However, thanks to insurance companies becoming more diligent in identifying fraudulent claims, one insurance scam is now detected every five minutes. That’s 300 per day.
Let’s look at these false insurance claims and the consequences of lying to an insurance company here in the UK.
Common fraudulent insurance claims
Insurance fraud is a serious crime that has increased in recent years. The methods behind these claims are consistent, from exaggerating a claim to intentionally providing false information when applying for cover.
As fraudulent insurance claims have become more detectable, the consequences have become harsher in a bid to ‘crackdown’ on insurance fraud. Take these high-profile examples.
In High Wycombe, Mahmood Khan claimed over £40,000 of jewellery was stolen from his home during a burglary.
It was later discovered that the 44-year-old had hidden some of the items, including a diamond ring, in a suitcase.
His punishment? Nine months in prison, fined £9,000 and ordered to pay £1,000 compensation.
Another recent example took place in Milton Keynes when then 28-year-old Daniel Silver falsely claimed for a £6,150 Rolex watch, stating he’d lost it in a sunbed shop.
The insurer caught him out from the intelligence they’d gathered during an investigation and given a 12-month community order of 200 hours of unpaid work.
As you can see, the UK’s punishment for false insurance claims is severe and truly not worth the risk.
A spokesperson from Ripe Insurance: “Even far-fetched, ludicrous claims don’t cease to surprise me anymore. But the one that occurs the most is falsifying their declarations.
For instance, people may have previous claims but state that they haven’t or may state that they have had no previous criminal convictions or county court judgements.
Falsifying documents from jewellers is up there too, and you’d be surprised how many people find something they’ve lost straight after we start to ask tricky questions!”
Instances like the above show just how prevalent fraudulent insurance claims are. But why do people do it when they face a criminal record, prison time and hefty fines? What is their motivation?
Reasons for making fraudulent insurance claims
For most of us, it can be difficult to understand why people make false claims when the punishment for insurance fraud in the UK is so serious and the potential impact so large.
Let’s look at the main reasons behind making bogus insurance claims.
Let’s face it - people tell little white lies given the opportunity to benefit more from a situation.
It’s this same temptation which causes people to commit insurance fraud. For example, if something happens to someone’s prized possession—perhaps it is stolen—they might decide to lie about its value or what was stolen.
This way, they might squeeze more money out of the insurer, having only told a few lies.
2. The cost-of-living crisis
Fraudulent claims are on the up thanks to poor economic conditions that create uncertainty and desperation, causing people to commit crimes to bring in a bit of cash.
With a decline in real wages, sluggish financial growth and, of course, the confusion surrounding Brexit, it’s no surprise the practice is becoming more common.
3. People believe fraud is a 'harmless' crime
Some people believe insurance fraud is a ‘victimless’ and harmless crime—a guilt-free way to make a lot of extra cash. It’s not. This leads us to the impact of insurance fraud.
Fraudulent insurance claims affect everyone
Insurance fraud is a very serious crime that impacts society at large.
Valuable public resources such as the NHS and law enforcement are wasted on tackling fraudulent crimes, wasting taxpayers’ money.
It also affects upstanding policyholders, who are forced to pay higher insurance premiums because the costs of these bogus claims are consequently passed on to customers.
We’ll reiterate—an average insurance policy costs an estimated £40 a year more than it should be due to this activity bumping up the prices. Therefore, everyone loses out—everyone is a victim.
How insurers are tackling fraudulent insurance claims
It’s no surprise that, given the scale of the issue, insurance companies are coming down harder on fraud.
They have created new ways to improve detection, which has resulted in a rapid increase in the amount of fraud exposed.
With insurers using new state-of-the-art technology, sharing databases and with fraud specialists on speed dial, one insurance scam is detected every five minutes in the UK.
Plus, the consequences of lying to your insurance company in the UK are more extreme than ever, which certainly helps their efforts.
The punishment for false insurance claims in the UK
To eradicate this real threat, insurers take a strict zero-tolerance approach when they catch someone out
Cases are more regularly reported to the police for investigation, who also adopt a tougher attitude to insurance fraud.
Fraudsters may face imprisonment, land themselves with a criminal record, struggle to find employment and be barred from buying insurance or other essential financial services.
On top of this, insurers are urging people to help end this crime by reporting fraudsters and supplying information on suspected insurance fraud.
Fraud just isn't worth it
Honesty is the best policy.
We’ve examined the disastrous impact fraudulent insurance claims have on society, individuals, and the perpetrator. With insurance companies becoming alive to them and adopting a no-nonsense approach, the risk certainly outweighs the perceived benefits.
Though, with anti-fraud strategies so rife at the moment, it’s important to highlight that honest policyholders should feel assured that they can make successful claims with their insurer and get the outcome they deserve.
John Woosey, Founder and Managing Director of Ripe Insurance: “Here at Ripe, we think it’s important to have a close and honest relationship with our policyholders, and this trust works both ways.
We must be open with our customers about the insurance industry and the issues we face. We want all our honest, law-abiding policyholders to be confident that we take insurance fraud seriously.
We will take the required actions when we feel that investigations are necessary. Stopping fraud benefits everyone, so we’ll continue to use all the tools available to us to ensure Ripe remains at the forefront of tackling fraud, to the ultimate benefit of all our loyal policyholders.”
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