“The whole question here is: am I a monster, or a victim myself?”
Fyodor Dostoyevsky, Crime and Punishment
Tough on crime, tough on the causes of crime was a rallying call to treat the symptoms of criminal – often violent – activity that threatened a civil breakdown in society more than a decade ago. Recently released crime figures have been a sobering reminder that we have some way to go before we adequately treat the causes.
So, in this blog I want to ask two questions: “Have we forgotten about the victims?” More precisely, I am referring to the victims of insurance fraud whose number are spiralling out of control. The other question I want to ask is: “Why do the fraudsters do it?” and could that knowledge inform our response to understanding the causes and mitigating the threat?
Despite the increased public awareness, more modern types of insurance fraud still show no signs of abating with fraudsters inventing ever more sophisticated scams. In 2016 the ABI reported that UK insurers detected 125,000 dishonest insurance claims valued at £1.3 billion. Undetected insurance fraud is said to cost the UK economy circa £2 billion per annum.
Whilst this figure was 5% down on the previous year, the deterrent of detection leading to a possible criminal conviction doesn’t seem to be dissuading the less conscientious members of society. That’s why I want to make a case for stiffer sentences, a campaign to turn words into action and make a case for the victims of insurance fraud.
Insurance fraud has always existed
In a galaxy far far away, or at least when I was a nipper just starting out on my insurance journey, insurance fraud occurred. Yes, it’s not a new invention, pesky fraudsters even plied their nasty trade even back then.
An epigram by the Roman poet, Martial provides evidence the phenomenon of insurance fraud was already known in the Roman Empire during the First Century AD.
"Tongilianus, you paid two hundred for your house;
An accident too common in this city destroyed it.
You collected ten times more. Doesn't it seem, I pray,
That you set fire to your own house, Tongilianus?"
Book III, No. 52
Whilst insurers knew it was going on, the prevailing historic zeitgeist was to address it in the front room with window curtains firmly drawn. Looking back, I can think of several instances in my early career where the fraudulent policyholder was simply told ‘this claim in fraudulent, we’re not paying it and we’re cancelling your policy ab initio'.
The fraudster policyholder would inevitably go skulking off into the sunset never to be heard of again and most importantly the insurer would have dealt with the issue without washing its dirty laundry in public for fear of adverse publicity.
So it’s nothing new. In fact, it would be fair to say that insurance fraudsters, if my CII studies are correct (and they may not be – it was a long time ago now), played a central role in development of the concept of ‘insurable interest’, that was codified in the Life Assurance Act 1774.
I guess it will remain a universal truth that as long as a person or a business has something that somebody else wants, criminals will be hell bent on inventing ever more devious scams aimed at snaffling stuff.
Great to see the industry has come a long long way
I had a cold a few weeks ago which I suspected was Man-Flu, so like all good patients I took to my bed, took virtually every over the counter drug imaginable and thought I’d give day time TV a go.
First up was a programme called ‘Claimed and Shamed’ on the BBC presented by the hip swirling Ore Oduba of Strictly Come Dancing fame. What a fascinating watch (check it out on iPlayer).
If you haven’t seen it, Ore basically covers off a few insurance fraud detection stories that include Oscar winning performances from members of the insurance profession that inevitably culminate in pesky fraudsters being caught and justice being seen to be done (well sort of).
I say ‘well sort of’ because despite the sterling work that is being done by the Insurance Fraud Taskforce, the Insurance Fraud Enforcement Department, The ABI, insurers and BIBA, when insurance fraudsters are tracked down and prosecuted the sentences they receive seem woefully inadequate.
The court sentences are not working
Over the last year www.youTalk-insurance.com has covered numerous insurance fraud prosecution stories that point to the fact that sentences are too light.
The sample of stories shown below sadly feature the recurring word ‘SUSPENDED’
- Man sentenced after he made 13 false insurance claims - Suspended sentence
- Man sentenced for making false insurance claims worth over £40,000 - Suspended sentence
- Woman who made false injury claim then did bungee jump on TV is sentenced - Suspended sentence
- Woman sentenced after falsely claiming her business premises had flooded – Suspended sentence
- Deed poll fraudster sentenced for making false car insurance claims – Suspended sentence
I could go on, but I think you get my point – Sentences are inadequate and not deterring criminals
The one area where there seems to be a glimmer of light relates to ‘crash for cash’. My ‘bar room lawyer’ assessment is that this might be due to the fact that in such cases the criminals involved are putting lives and limbs are risk in their pursuit of a pecuniary gain but even here not enough is being done.
Organised gangs are staging car crashes to commit insurance fraud. As part of a national scam worth roughly £340m a year, criminals are orchestrating accidents to make fraudulent insurance claims, the profits of which are used to fund other crimes, including illegal firearms and drug smuggling. As honest policyholders we pick up a collective bill for fraud through increased premiums.
It is estimated that a staggering one in seven personal injury claims are linked to crash for cash frauds, and that figure could be the tip of the iceberg. An analysis of crime statistics reveals there are also problem hotspots in certain parts of the country. Birmingham is at the top of the list, with six of the top 10 postcodes that have been linked with the crime. Bradford is another troubled area with postcodes on the list, as well as Bolton. Other places that appear on an enlarged 20-strong hotspots list include Halifax, Manchester, Enfield, Ilford, London and Liverpool.
According to the ABI these scams have already had fatal consequences.
A 34-year-old woman was killed after she was struck by a van moments after being involved in a deliberate collision orchestrated by a gang. The men responsible for the crash were each jailed for 10 years. Even so, a depressing 8% of people would still consider taking part in a crash for cash scam in order to gain financially, according to shocking statistics published by the Insurance Fraud Bureau.
The compensation culture we have is being blamed for the rising tide of fraudulent claims. Insurance giant Aviva examined its own data on whiplash and found that 94% of all personal injury motor claims it had paid were for minor injuries such as short-term whiplash. In France, this figure is estimated to be around 3%.
Hang ‘em High?
Without sounding like a ‘Hang ‘em high Judge’, I think it’s about time our legislators and politicians grabbed hold of this issue and perhaps in doing so make reference to the Sentencing Council’s guidelines for the crime of theft.
The subject of appropriate sentencing for insurance fraud does not need an existential Dostoyevsky-esque driven philosophical debate. The facts are quite simple and plain to see. With 125,000 dishonest insurance claims the issue has reached epidemic proportions and notwithstanding the great work being done to address the issue the obvious chink in the whole process is sentencing. Let’s send more insurance fraudsters to jail and publicise the fact.
The underlying issue is more nuanced, however, than sentencing and as always it comes down to changing attitudes and education, addressing the causes. We send police officers, ex cons and victims of accidents into schools to talk about crime prevention so why not do the same for insurance fraud victims? If eight percent of people would consider taking part in a crash for cash what does that say about our society. Let’s say that the average person has an extended family and circle of friends of around 30 to 40 people. You do the maths...
This is a problem that goes way beyond insurance. As an industry and society we have to do our best to make sure that crime doesn’t pay, that punishment is just, and above and beyond that we need to address the causes, the fraudsters’ motives.