Aviva reports insurance claims fraud up by 13% in 2021

Authored by Aviva

• Aviva uncovered more than 11,000 instances of claims fraud in 2021, worth more than £122m
• Aviva has more than 16,700 claims under investigation for suspected fraud
• Early signs that organised whiplash fraudsters are moving into vehicle repair/replacement claims
• Fraud volumes expected to increase further as cost of living increases are felt by consumers
• Home insurance fraud volumes up by 45% - the highest in seven years
• Consumers warned to be vigilant against insurance offers from unclear, unsolicited sources

Leading UK insurer Aviva says that the proportion of insurance claims tainted with fraud grew by 13% in 2021. 

Aviva uncovered more than 11,000 instances of claims fraud last year, worth more than £122m. That is equivalent to detecting more than 30 bogus claims every day, worth a staggering £336,246. Aviva is investigating a further 16,700 claims for suspected fraud.

Increases in the proportion of fraudulent claims Aviva detected were seen across its motor, home and liability books of insurance. Similarly, the number of detected application frauds – including ghost broking – remain high, and Aviva is warning consumers to be vigilant about unsolicited insurance offers from unusual sources.

Whiplash fraud continues

Motor fraud continues to account for 60% of all claims fraud detected by Aviva. The Whiplash Reforms, which came into effect at the end of May 2021 and reduced compensation awards for minor whiplash injuries, are expected to reduce the incidence of motor injury fraud over time as the disproportionate compensation awards and fees are brought in line. This will remove the financial incentives for both organised and opportunistic fraud.

The proportion of fraud detected on motor injury claims last year grew by 10.7%, as organised fraudsters sought to take advantage of the opportunity prior to the introduction of the reforms, and traffic volumes returned following the easing of Covid-19 restrictions.

Motor injury fraud is different from other forms of fraud in that it puts the public’s personal safety at risk through deliberately organised accidents such as crash for cash, and diverts scarce public services – including the NHS, ambulance, police and GPs – from where they are needed most.

There are early signs that organised whiplash fraudsters are focusing their efforts on fraud connected with the repair aspects of a motor claim, including credit hire and repair, which grew by 13% in 2021. Aviva witnessed particular growth in this area after the reforms came into effect, signalling a shift in organised fraudsters’ focus.

The most common fraudulently claimed-for items are mostly technology gadgets:

• Mobile phones
• Televisions
• Laptops
• Tablets
• Jewellery                  

Sharp increase in home insurance fraud

While only accounting for 13% of the fraud Aviva detected, the number of bogus home insurance claims Aviva detected shot up by 45%, the highest in seven years. Aviva flagged last year that home insurance fraud detection would be a priority for the insurer in 2022, with an expected increase in home insurance fraud and the cost of living creating additional pressures.

The most common types of detected home fraud were bogus claims for accidental damage, accidental loss and theft. The average value for a fraudulent household insurance claim was £3,645.

Slips, trips and falls

The rate of liability claims declined for suspected fraud committed against a business’ employers liability or public liability insurance policy grew by 12% in 2021. It is believed that some of the organised parties involved in whiplash fraud have moved, or are moving, to pursue liability fraud. One in four (25%) bogus liability claims rejected by Aviva are for slips, trips and falls.

Policy fraud & ghost broking

Aviva identified fraud on more than 20,000 motor policy applications. Of these, ghost broking accounted for 15% of all the application fraud detected.

Ghost broking is when an unauthorised person acts as an insurance intermediary and purchases insurance policies using false or misleading information about the customer to acquire cheaper insurance for the ‘customer’. Ghost brokers will usually amend the insurance policy before sharing with their customer to show ‘proof’ of their insurance purchase. However, the insurance policy is all but worthless, as the ghost broker lied about the identity and/or nature of the risk being insured (such as address, age of driver, etc.). 

Ghost broking is a unique form of fraud, in that the ‘policyholder’ directly compensates the fraudster for a policy that is essentially worthless, meaning they are driving without valid insurance, which is not only illegal, but also carries all of the associated risks of driving uninsured. Aviva has a dedicated team focused on the problem and has invested in technologies to improve prevention and detection.

As pressure mounts on the cost of living, customers should be wary of insurance offers from unclear, unsolicited or unusual sources – especially online messaging platforms. If customers have any concerns about the legitimacy of an insurance offer, they can check the broker’s status on the Financial Conduct Authority or British Insurance Brokers’ Association websites, or alternatively contact the insurer directly. Ultimately, if a premium looks too good to be true, then it probably is.

Aviva successfully campaigned for false or misleading online financial promotions to be included in the Online Safety Bill, the inclusion of which the insurer hopes will help to tackle the scourge of ghost brokers selling worthless insurance online.

Waseem Malik, Chief Claims Officer, Aviva UK General Insurance, said, “Fraud is typically committed for reasons of need or greed, and we believe the increase in claims fraud last year is linked to reduced incomes during Covid lockdowns.

“As more households and businesses come under increased financial stress due to the cost of living crisis, we expect to see more claims fraud, especially on home, small business and liability insurance policies. Insurance fraud is a crime, and we are continuing to invest in strengthening our fraud defences to protect genuine customers from the impact of fraud and to keep premiums low.

“We will also be keeping a watchful eye on motor injury fraud this year, to see if it declines as the Whiplash Reforms bed in. Although it’s early days, we are starting to see some signs that organised fraudsters involved in motor injury fraud are moving into the repair side of motor claims, as well as liability frauds such as slips and trips.”