The UK insurance industry provides an important safety net for millions of UK households and businesses. When the worst happens, be it fire, theft, flooding or accident, it is the insurance industry that provides the financial lifeline to get families and businesses back on their feet. On average, the industry pays out £9.8 million every day to households and £22.4 million per day to motorists. As traditional buffers of easy credit and savings are eroded, an insurance policy can be the last line of defence.
Yet the industry is under pressure. With consumers feeling the chill wind of austerity, the temptation to convert monthly premiums into a lump sum payment can be too much. Last year, fraudulent activity surged 23%, with fraud accounting for 11 in every 10 000 applications and claims. According to the Association of British Insurers, the cost of insurance fraud now tops £2 billion a year, adding an extra £44 a year to the premiums of every UK policyholder. Other studies suggest the fraud bill could be as much as £10 billion a year. Combating fraud could save the industry billions of pounds and, more importantly, ensure that this vital safety net is affordable for all.
Ordnance Survey, which provides location intelligence to help insurers detect fraudulent activity, asked members of the Insurance Fraud Investigators Group (IFIG) about their experiences of fraud. IFIG brings together insurers, lawyers, loss adjusters and investigation agencies to tackle the growing problem of insurance fraud in the UK. The survey took place during August 2012 and builds on earlier surveys in 2009 and 2010. Ordnance Survey asked Marketforce® Business Media to analyse the results, assessing them in the light of both the earlier survey findings and recent market developments.
The findings confirm that insurance fraud is on the rise, and insurers fear there's more to come as the recession tightens its grip. The industry is rising to the challenge; investing in people and technology to prevent, detect and prosecute fraud. But there is much more to do, with insurers calling for improved data-sharing, measures to tackle the growing menace of fraudulent applications and for aggregators to step up to their fraud-prevention responsibilities.