Insurance fraud is on the rise. Experian, a well known credit check company, says that for every 10,000 insurance claims, 38 are fraudulent. In the past 5 years, this number has doubled.
The reason for such an increase in insurance fraud is the catastrophic effect that the economic crisis has had on domestic economies. With more and more families going through financial difficulties, it is no surprise that some of them decide to earn some extra money by deceiving their insurance company. According to Experian, fraudulent applications will continue growing during 2013.
In most cases, individuals try to deceive the insurance company by giving a false picture of their real situation. Lying about their financial situation or their employment status is very common across most fraudulent claims. In fact, this situation is repeated in more than 90% of the cases.
There are two different types of frauds: hard and soft. The first deals with those frauds that involve important amounts of money, while in the second case, it is equivalent to petty crime. Soft crimes are much more common and more difficult to detect by insurance companies.
Although most of cases are easily uncovered by the already very experienced insurance companies, individuals are becoming increasingly creative when planning fraudulent claims. For this reason, it is not unusual for insurance firms to hire private detective agencies to help them solve the most complex cases.
Most common claims
Some individuals are very creative and plan complex insurance frauds like the one committed by the couple who made more than £900,000 by seting up a ghost firm offering very cheap car insurance. However, in the majority of cases, fraudulent insurance claims follow similar patterns. Most fraudulent claims involve either a car, a house or health issues.
Stolen Car
This is an absolute classic. Stolen car claims are usually carried out by those who either need quick cash or cannot afford to pay for the car anymore. The scheme can be carried out in two different ways:
Selling the car overseas
In this case, the car owners sell their cars overseas without doing any paper work. Once the trade operation has concluded, they call the insurance company to claim that their car has been stolen.
Sell the car parts
Instead of selling the car as a whole, some individuals prefer to take it to a body shop and divide it into different parts that will be sold later on.
Car crash or damage
Car accidents are often simulated as a way to claim insurance money. In most cases two drivers agree to have a car accident as a way to obtain some money from the insurance company. Here, the value of the vehicles is usually inflated to obtain a higher return.
In other cases, instead of simulating a car accident, the driver reports a real collision and submits an estimate cost of reparation. Once the insurance check is collected, the car is not repaired.
Although not so common, some people go a step further, not only claiming car damages, but also, health problems as a consequence. In this case, a doctor will need to be involved in the scheme.
Arsons
Some individuals even set fire to their own properties to get the insurance check. Given the complexity of these cases, the number of fraudulent claims is not as high as in the previous examples, although each successful claim is very costly for insurance companies.
Before burning their house, most owners take out of the property all valuable goods. Some others simply make sure that their insurance has a good valuation of their assets before committing the crime.
Simulated Burglary
Some homeowners report that somebody has broken into their homes and stolen certain valuable items like jewellery, electronics or even works of art. The fact that the police need to be so closely involved in these claims manages to discourage the majority of people from executing them. However, a number of them do take place every year.
Insurance fraud has huge repercussions not only for insurance companies, but also for many of their clients. The reason is that, given the increasing number of fraudulent claims, insurance firms have raised the price of their services in order to compensate for the generated losses.
About the author:
Miguel Rojas works for Conflict International, a private detective agency that provides a wide range of investigation services all over the UK and across Europe. Conflict International specialises in corporate investigations, covert surveillance and matrimonial investigations among other services.
