Hard-up families are increasingly turning to insurance fraud to help see them through the credit crunch.
Insurers have seen an 80 per cent increase since last year in the number of bogus household and vehicle claims, many of which are being made by middle-class families struggling to pay their bills.
Typical scams include householders hiding their valuables and staging a burglary in an attempt to claim thousands of pounds in cash, or dropping their old television down the stairs so they can claim for a new flatscreen model.
In 2007 the insurance industry detected 91,000 frauds, which is set to rise to more than 160,000, in 2008.
Fraud costs the insurance industry an estimated £1.6 billion every year, adding £40 to the average annual household premium.
Richard Davies, group fraud risk manager for Axa UK, said: “The current financial crisis provides all the drivers for an increase in insurance fraud. If, for example, someone has a car loan they’re struggling to repay, perhaps because they’ve lost their job, they might be tempted to pay off the loan by making an insurance claim on the car.
“The most common type of opportunistic insurance fraud is people exaggerating claims by adding extra items to a genuine claim.
“Often they’re middle-class families who are looking for a way of getting extra money to help with the mortgage or service other debts.
“We’re seeing a lot of paint spillages with straight edges where people have just taken a paint roller to their carpet to claim cash for a new one, and it’s amazing how many TVs are getting dropped down the stairs.
“We’re also seeing people hiding valuables with the intention of claiming on them.
“But one of the biggest problems is organised crime, particularly with motor insurance claims. Criminal gangs will orchestrate a car accident by cutting someone up and then slamming their brakes on so the person goes into the back of them, then they’ll claim for all sorts of medical bills, claim for non-existent passengers who they say suffered whiplash, loss of earnings et cetera.
“But insurance firms are having much more success in detecting these crimes. We are detecting 80 per cent more fraud than we did last year and we’re expecting to see a lot more people going to prison or facing hefty fines as a result.”
Andrew Buck, fraud manager at Norwich Union, said: “Clearly when times are tough, such as in the current economic climate, crime is likely to increase and so we expect to see more fraud.
“Insurance can be seen as a quick and easy way to replace items that people can no longer afford to buy for themselves.”
Malcolm Tarling, of the Association of British Insurers, said: “People make the mistake of thinking insurance fraud is a victimless crime, but it’s not. We all end up being victims, because all of use have to pay bigger premiums as a result of fraud.
“Unfortunately we know that insurance fraud tends to go up when there is a recession. The main reason people commit insurance fraud is that they need the money.”
By Gordon Rayner, Chief Reporter
Last Updated: 5:40PM GMT 26 Dec 2008
Source: The Telegraph