The crime is estimated to account for between five and ten percent of insurance claims in the UK with both soft fraud, that is people exaggerating the scale of a legitimate claim by overvaluing the items lost or stolen or by adding additional items to the claim and the more serious hard fraud which includes some of the more news-worthy such as deliberately causing car accidents to make claims or inventing fictitious passengers who claim for phantom injuries.

With those who are caught committing insurance fraud facing criminal charges and possible prison terms as well as far greater difficulty getting any kind of insurance in future it is surprising how wide spread the crime is becoming.

Fraudulent claims are estimated to have risen by up to a third in the last year and are increasingly linked to highly organised criminal gangs with motor insurance claims being a favourite target. As a result of this, car insurance costs have risen by around 34% in the last year to an average of £850, up by £220 from the previous average of £630. With claims for whiplash injuries up by over twenty-five percent in the last six years it is thought that around £44 of every driver’s insurance premium goes to cover the cost of fraudulent accident claims with up to 30,000 staged car crashes being estimated to have occurred over the year. This cost is especially significant as it makes cheap car insurance for young drivers almost unobtainable. Many of the gangs buy full insurance for a vehicle and then claim for an accident with a third-party insured vehicle as the insurer will not inspect the third-party vehicle, then sell the usually expensive car being claimed for and either falsify the paperwork that the vehicle has been written off or buy a wrecked vehicle of the same type to pass off as the insured vehicle.

Families are more commonly committing travel insurance fraud, claiming for lost items and luggage that never existed although insurers are becoming more organised in investigating these claims with a growing number of companies specialising in insurance fraud investigation. By examining the receipts and nature of the items many false claims are exposed. Insurers are also becoming more sophisticated in how they look for cases of fraud, many companies share information between insurer databases aiding in catching those who try to cheat the system.

The impact of insurance fraud is widespread and not limited to the increase in premium prices, ‘crash for cash’ accidents often involve innocent drivers who may be injured and have their lives turned upside down by the fall out from an accident. The most common form of this kind of gang activity is using two cars owned by the gang to target an innocent lorry driver. One car leads the lorry whilst the second car follows behind the innocent motorist. This follow vehicle then overtakes both the innocent lorry driver and the leading gang car, pulling in sharply ahead so the second gang car breaks deliberately sharply causing the lorry to crash into the back of that car. In such accidents the driver who drives into the back of another is usually held responsible for causing the accident, the first gang car drives off and the lorry driver is claimed against for what looks like a legitimate accident. The young and old are getting priced out of some kinds of insurance with cheap car insurance for young drivers non-existent and the old and vulnerable left without car and home insurance. In some cases insurance companies themselves have defrauded members of the public by misusing funds paid for insurance, leaving people misled and potentially uninsured. What is surprising is that surveys of British attitudes to crime have found that almost five million Britons no longer consider it wrong to file a fraudulent insurance claim.

The insurance industry expects both more incidents of insurance fraud and for it to make up a greater percentage of insurance claims as the economy continues to struggle with the economic downturn and the cuts of the coalition government. In fact the industry has been giving awards and sharing knowledge among companies as they come up with new ways of fighting insurance fraud. With the increasing sophistication of organised crime and gangs trying to take advantage of insurers and the public this contest is developing into an arms race. The rising cost of premiums means cheap car insurance for young drivers and older drivers, as well as travel and household insurance, may be a thing of the past.