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The lies that are driving up insurance costs

Laura Shannon
by Lovemoney Staff Laura Shannon on 01 August 2012  |  Comments 10 comments

Lying to an insurer isn't a victimless crime. We all pay the price as our insurance costs go up!

The lies that are driving up insurance costs

We all pay the price for insurance fraud. These are some of the lies and scams that see us all paying extra each year – and some examples of where the swindlers didn’t get away with it!

Car crash fakers

Known as cash-for-crash scams, fraudsters driving on the roads around busy junctions, roundabouts and slip roads will suddenly apply the brakes so you plough into the back of their car (also known as ‘slam-ons’). In some cases the brake lights will have been deactivated too, so the innocent party behind never stood a chance.

The con artists then set about claiming on your car insurance policy for whiplash injuries via a no-win, no-fee claims management company.

Adding insult to a simulated injury, the fraudsters may even try to claim on your policy for people who weren’t even present at the time of the accident. On top of this are costs for the conman’s car recovery (even if it was driven away at speed post-collision), vehicle repairs for damages that existed before the crash and loss of earnings for the driver and his phantom passengers – until he or she has netted a princely sum of around £30,000 or more.

This type of activity adds £44 a year to each insurance premium, according to the Insurance Fraud Bureau (IFB) and is an area that insurance company fraud squads are cracking down on.

Zurich Insurance revealed a case of how one man staged numerous crashes at the same roundabout – charging the different vehicle owners £500 a time so they could file big fat fraudulent insurance claims.

In a nice twist of justice he was snared by another Zurich policyholder who became suspicious of the man who crashed outside his office at the same time every day – and took photos to hand to police.

Man goes missing after freak canoe accident

Sounds fool-proof doesn’t it? Tell your insurer that your husband never returned from his canoeing trip, he lays low until declared dead and then you all benefit from the £250,000 life insurance pay-out. Problem is if you’re lying low it’s unwise to have a happy snap taken of you both in Panama . . .

You might recognise this as the story of John Darwin – ironically a former prison officer – who tried to fleece his insurer by faking death and rocking up six years later with ‘amnesia’. He and his wife were both in on the con and were sent to jail after a photo of the couple turned up; dated during the time Darwin was ‘missing’.

Smaller scale life insurance fraud includes lies about identity or medical history. But every little helps - adding to the overall costs you pay for a policy.

My giant TV has been robbed!

An age-old home insurance scam involves submitting a claim for non-existent items or for damage or loss to something which is intact and where it should be. Alternatively, the person will exaggerate the claim and lie about the value of an item.

In another example from Zurich, a household in the north-east tried to claim for a flat-screen TV stolen during a robbery. The only problem was that the TV was bigger than the window the burglars had used to gain entry to the house.

Whether or not these types of claims come from deceitful or desperate households, the consequence is an increase on everyone’s home insurance premiums.

White lies on forms

You might think of telling a small and insignificant lie to get cheaper insurance, but it could invalidate your cover. And if your insurer cottons on you could be handed over to police and rejected by other insurance companies in the future. Read more in: why a few white lies could cost you a fortune.

Interestingly, in the future (possibly as early as 2014) drivers could be forced to declare their driving license number when buying car insurance. Their application can then be cross-referenced with the DVLA database, trapping anyone who is telling porkies about speeding convictions or other driving offences.

Travel insurance fraud

Two British law graduates ended up in a Brazilian jail back in 2009 over an alleged travel insurance fraud. They were later acquitted but the tale is a reminder of how seriously holiday insurance fraud is taken.

Faking the loss of expensive gadgets or cash while abroad only serves to push up everyone else’s expenses. Travel insurance is typically cheap but most of us would like it to stay that way!

Slip-and-trip rings

It’s not unheard of for people to orchestrate individual slips or falls where there are cracked pavements or potholes, then claim compensation from the local council.

Although this doesn’t directly push up any type of general insurance you buy, it’s a type of insurance fraud with pay-outs coming from policies held by local authorities, public bodies and companies – robbing funding from frontline public services or employers.

Three people involved in a slip-and-trip fraud in the London Borough of Havering are now facing jail. A man who claimed to have tripped on a pothole was demanding thousands of pounds after breaking his ankle. His friend called the ambulance and his dad backed up their version of events.

However, ambulance records revealed the ‘victim’ was nowhere near the pothole when he was picked up and it turns out he had actually fallen off a wall.

A new emerging trend is where people identify a qualifying hazard, such as a cracked pavement, and publicise them, resulting in multiple personal injury claims.

For more tales about people ‘trying it on’ in the most bizarre of ways read: The 10 most unusual personal injury claims.

More on insurance:

easyJet offers insurance for missing your flight

10 mistakes that could invalidate your insurance

Why car insurance premiums will jump 25%

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Comments (10)

  • Tanni
    Love rating 92
    Tanni said

    Agree with the article but the author had a small oversight. It does Involve Insurance companies doing fraud or as I call it pulling a fast one. For example, many, many years ago a family freind had a non fault car accident. My mate had purchased the car for around £9000 from an auction and it was worth about £12000. His fully comp policy sent him an offer of £6000 for the car and said it was the final offer. The insurance claims handler advised him that the value had dropped etc as He'd had the car for about a year. They must have thought he was a mug or worse still desperate for any funds to get a new car as his courtesy car was going back. I demanded they repair his car and put him back in the position he was prior to the accident as after all that is the real purpose of insurance. 3 months later after much letter writing they agreed to repair it, their insurance approved garage had quoted £4000 for repairs. I took the car to the same garage which repaired it for £2000 and they advised that they charge the Insurance company more because insurers prefer to write off cars for low value and resell through an agent to salvage yards for a decent price. This car would have been in a salvage yard for atleast £8000 damaged. A few months later my mate sold the so called car that had, according to the insurance company; dropped in value to £6000, he sold it for £10,000. I then wrote to the insurer and advised that they had tried to rob my mate of £6000 and that we will take this further, even to court. As soon as that letter with a mention of the ABI and OFT was sent, my friend got a cheque for £4000 from the insurer as a sorry for failing to deal with the claim properly.

    All in all, insurers lead the way for these dodgy claims as they are dodgy in handling claims themselves. Insurers cannot afford to be taken to court as it will set a precedent should they lose...remember the courts are designed to be on the side of the bona fide consumer. Never settle for the first offer and if need be get your own engineer to survey the car for damage and payout value. You can also recover the costs for this survey if you have advised your insurer that you wish to do this. Remember you are the customer and they have duty to put you back to the pre accident condition.

    Report on 02 August 2012  |  Love thisLove  3 loves
  • plainvanilla
    Love rating 11
    plainvanilla said

    What about the dodgy premiums from all insurance companies.

    I received an insurance renewal quote through the post which I thought too high - a large increase from the previous year - so I went on line and found a cheaper quote. But this cheaper quote was actually from the same insurance company I was with.

    I rang them and complained and got an even cheaper quote than the one online.

    The insurance companies are milking their customers for whatever they can get away with.

    Honesty and loyalty and fairness and openness is clearly lacking with the insurance companies as well as the banks.

    Report on 04 August 2012  |  Love thisLove  3 loves
  • Aitken B
    Love rating 125
    Aitken B said

    I agree with the 2 previous posts but I would not be sanguine about the courts being there to be on the side of the genuine consumer. I know it's a criminal rather than a civil situation but just try and defend a false and falsified speeding charge and see how far you get.

    Of course we should all do what we can to prevent fraud but, as the 2 posts above point out, the insurance companies do not have clean hands in this. Neither, by the way, does the Ombudsman.

    A year or so ago I was involved in an accident where the other party was entirely at fault. I reported the incident as required but stressed that I was NOT making a claim.

    As all insurance companies do all they can to evade (yes evade) their liability, It took some time to resolve the dispute and renewal time arrived before it was completed.

    The renewal notice arrived showing 3 years NCD when it should have been 14 years. This resulted in a premium inflated by about £600. Of course I challenged the notice and was told that it was accurate as I had made a claim. "NO Claim" I countered and challenged them to produce the claim form. They could not, of course, but confirmed their reduction of NCD to 3 years.

    They were demanding a hugely inflated premium on the basis of information they had falsified.

    This is an excellent description of FRAUD.

    I complained to the Insurance Ombudsman (Financial Ombudsman).

    Open and shut case I would have thought. I would have expected the body supposedly there to support the consumer would have taken the company to task even to the point of recommending prosecution. Not a bit of it. The Insurance Ombudsman supported the company.

    Their reason, probably straight from the company, was that all companies do this because it is possible I could make a claim.

    No change there then - I could make a claim for any time during the coverage period but the fact remains that I had NOT made a claim.

    After a long time battering them (the Ombudsman) they did grudgingly get the company to offer me £50 to shut up and go away. I did not respond to their "offer" - I wanted the company prosecuted to stop them and to "encourage" the others.

    I considered reporting this fraud to the City of London Police but decided it would have been a complete waste of time on the basis that I would expect that, like the body supposedly there to protect the consumer, they would side with the industry. I would have had to take out a private prosecution which would be very expensive and unlikely to succeed given the institutional corruption that appears to be rife in the industry and apparently supported by the Ombudsman's "service".

    Doubtless companies continue to make, in my view, illegal hay while the sun shines on this particular scam.

    Fraud is fraud whether it is perpetrated by criminal gangs or insurance companies but I bet the Insurance Fraud Bureau (IFB) does not investigae the companies and report them for their frauds.

    Report on 04 August 2012  |  Love thisLove  1 love
  • Tanni
    Love rating 92
    Tanni said

    The insurance ombudsman and insurance fraud investigators are funded by the insurance companies. Most insurance companies if not all of them follow a loosely termed voluntary code of conduct.

    Makes sense: why would the ombudsman who is paid by insurance companies prosecute the hand that feeds them?

    Insurance is just a scam. Realistically government should insure the motorists as a block policy for the entire land. Ie if all us 20 to 39 million car users paid a tax of £200 each a year to the government, then the government has more than enough funds to start its own cheaper, fairer insurance company that would look after us all even in the event of an uninsured driver hitting us as we could handle the 300000 or so uninsured motorists by encouraging them to pay £200 rather then £5000 for their insurance.

    Then again the government is the last bunch of morons I expect to be trusted with anything as they are the ones facilitating this huge insurance fraud by passing the buck over to motorists via their pals in the insurance industry.

    Also another thing which is not related but interesting; have you heard about the government going on about these unscrupulous loan companies charging people 200- 2000 % interest on loans? I was surprised to learn the Vince Cable has interests in Wonga.com...,.so again I repeat that we cannot trust our elected officials to act in our interests as its clearly not in their interest to do so!

    Report on 04 August 2012  |  Love thisLove  2 loves
  • MK22
    Love rating 149
    MK22 said

    I'm not entirely sure that you can say that the Ombudsman wouldn't bit the hand that feeds it. You cannot run an insurance business without paying the Ombudsman's levy, irrespective of whether anyone complains about you. True, you have to pay a case levy, but as an insurance company has to pay that after 3 "free claims" irrespective of the outcome of the case, and even if the case goes against the customer the insurance company cannot legally re-claim those fees from the customer or ombudsman, I would have thought it would be in the Ombudsman's interest to take on as many cases as possible because they will get more money out of the insurance companies that way. Also, because of the case fees, it is in the insurance company's financial interest to ensure all claims are settled without going to the Ombudsman.

    Report on 04 August 2012  |  Love thisLove  1 love
  • Ginnymay
    Love rating 36
    Ginnymay said

    Insurance companies don't do too badly; money is taken from us punters and then genuine claims circumvented; for example, my late brother paid payment protection insurance on his credit card for 8 years, then they didn't pay out because he hadn't told them about an illness which was not what he'd died from. And on our household insurance, when the electricity went off when we were on holiday and the contents of our freezer and fridge were ruined, although we were covered, we were told that by the time we'd paid the excess on the policy, and our premiums would be put up the next time we renewed, that we would be better off not claiming. To my mind these are as questionable practices as some of the frauds you detail above. Incidentally, we have taken the PPI case to the Ombudsman, but apparently it will be a very long time before it is considered because of pressure of workload. And when I did inform my annual travel insurers that I had had a health scare, they said thank you very much and cancelled my policy, leaving me in the lurch for holiday cover. So I won't be crying crocodile tears over poor defrauded insurance companies.

    Report on 05 August 2012  |  Love thisLove  3 loves
  • Modreduk
    Love rating 9
    Modreduk said

    To my mind, most insurance seems to be a legal scam. That isn't to say it isn't necessary (or in the case of car insurance, a legal requirement) but the cost and other terms is a bad joke.

    I always, on receiving my car insurance renewal, call the company and ask them to quote me as a new customer. They are cynical but after a little persistence play along and then I get a better price. This has happened in almost every single case. If they can offer it then why don't they? Is it any wonder people have no loyalty when they are treated in such a way. I have also had to claim for a broken windscreen (some nice drunkard was throwing bricks around) which cost me £80 excess, thankfully no rise in premium as my NCD is protected, but out of curiosity I asked how much it would have been to have the windscreen replaced privately and it was a mere £100. Had my NCD not been protected it would have cost me more to claim, but if you don't tell them it has happened your insurance can be cancelled.

    As to lying on life insurance, these people seem to expect you to remember everything you have visited your doctor for over the course of your life. If you had an operation when you were 3 and didn't place it on your application that would be excuse enough for them to refuse to pay out the policy. I looked into medical insurance once as I have some health issues and the part that had me howling most was the fact they would cover me (at ridiculous cost) but would not cover me for the existing medical condition. I have to wonder what the point is then. I no longer worry about life or medical insurance, I have had cancer so I know they will not touch me.

    The biggest issue though comes back to car insurance, I have always tended to buy relatively cheap cars, less than 2k, and when I started driving the cost of insurance was more than the car. Life can be tough at the best of times and when faced with a bill that can be more than 20% of your annual income just for the privilege of gambling that you will not hit someone else (and that is the only consideration when your insurance costs more than your car) is it any wonder so many people decided not to bother and drove illegally or try to get a few extra quid out of the insurance company when they do have to make a claim.

    If you want people to stop insurance scams then clean up your act and make prices realistic, support people loyal to you, and stop looking for any excuse not to pay out or rip off the customers.

    Report on 08 August 2012  |  Love thisLove  1 love
  • CuNNaXXa
    Love rating 373
    CuNNaXXa said

    Many of the staged accident scams are run by organised criminals, not the average punter in the street. There was a documentary showing how Polish immigrants were forced into aiding these criminals by becoming the 'victims' of these staged accidents. In fact, the immigrants often had their passports confiscated by the criminals, so that they had nowhere to turn.

    Oh, and the insurance companies know of these scams, but they are too gutless to deal with these criminals, preferring to pass the cost on to us lot, rather than do their duty (yes, they have a duty of care to ensure that criminal action is reported to the appropriate authorities, as we all do, yet they cannot be bothered).

    I didn't know that Vince Cable had interests in Wonga! Would explain a lot. After all, if you want to make money, why not increase poverty, then benefit from it. Sounds about right for our so called leaders.

    Insurance is a rip off, but in many instances, it is a legal requirement. A National Road Insurance scheme would prove beneficial, and cheaper, but too many political supporters and sponsors would suffer financially, so our government would in no way jeopardise their funding.

    Report on 09 August 2012  |  Love thisLove  1 love
  • time2go
    Love rating 66
    time2go said

    There appears to be a trend in the above comments.... I also agree that Insurers must begin to treat their customers with a bit more respect.

    A recent non fault claim for my dad was dealt with by the broker, Drive Assist (Beware of them, just check google, and take pictures of the hire car before it is taken back!), The car body shop, and the insurer. When I questioned the reasoning behind writing the car off, I was sent from one company to another and back again....this all adds costs to the claim...... Guess who pays for the ineptitude????

    Report on 09 August 2012  |  Love thisLove  0 loves
  • Talent
    Love rating 77
    Talent said

    Quote.... Two British law graduates ended up in a Brazilian jail back in 2009 over an alleged travel insurance fraud. They were later acquitted but the tale is a reminder of how seriously holiday insurance fraud is taken.

    ........................

    Wonder who pulled the strings for these two alleged thieving scum?

    Report on 09 August 2012  |  Love thisLove  0 loves

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