23 Aug 2023

The most common types of insurance fraud - and how to fight your corner if you fall victim

With the cost of living driving spikes in insurance fraud, are insurers doing enough to protect customers?

Some forms of insurance fraud have spiked during the cost of living crisis, and innocent drivers are getting caught up.

Claims fraud cost the insurance industry more than a billion pounds last year, according to new figures from the Association of British Insurers (ABI).

While overall reports fell due to the introduction of new legal reforms to reduce personal injury claims, some specific forms of fraud appear to be on the rise.

We surveyed 111 Which? members who'd experienced insurance fraud in the last five years, and found identity theft, induced accidents and false claims were most common.

Read on to find out more about the key types of insurance fraud, and the steps you can take to protect yourself.

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'Opportunistic' insurance fraud

According to the City of London Police, 'opportunistic' insurance fraud cases rose by 61% between March 2022 and April 2023.

Opportunistic fraud is defined as occurring when 'somebody spots a chance in their everyday life to exaggerate a claim for financial gain, or provide false information when applying for insurance'.

A survey carried out in June by the Insurance Fraud Bureau (IFB) found one in 10 people said they would consider making a fraudulent insurance application or claim if they were struggling financially.

Part of the temptation can be the impression that it's a 'victimless' crime - with only the insurer losing out. But while insurers' losses are felt by drivers in rising premiums, fake claims can also impact customers directly when dubious allegations are made against them.

The sale of fake policies by so-called 'ghost brokers' can also involve ID theft, with fraudsters using innocent customers' personal details to orchestrate their scams.

Claims fraud

'Crash for cash' scams - where fraudsters intentionally cause collisions to profit from insurance payouts - are the most notorious form of claims fraud, with the potential to cause physical harm. Some 14% of fraud victims we heard from believed they'd been targeted in such 'accidents'.

And new variations on the theme are emerging. Admiral told us it recently investigated nearly 20 'wing mirror scams' - all involving the same circumstances: fraudsters throw an object at a passing car to make an impact sound, then pursue the driver claiming they've clipped their wing mirror (which was already damaged) demanding cash at the scene, or initiating a claim.

Signs you've been targeted in a 'cash for crash' scam

Here are the telltale signs that an accident has been staged to get an insurance payout - and what you should do if you're affected:

Application fraud

According to IFB's research, application fraud is increasingly tempting to younger drivers - with 27% of 18-24 year-olds surveyed admitting they'd consider lying on an insurance application to save money - up from 21% last year.

With premiums at record levels, this is unsurprising. Data from Confused.com shows the average car insurance premium for a 19-year-old is now £2,097 - and £2,404 for the average 18-year-old.

Find out more: how to find cheap car insurance

Ghost brokers

Widely felt cost pressures are being further exploited by 'ghost brokers'. These are scammers, operating mostly on social media, who claim to be able to secure car insurance at reduced prices (for a fee).

However, they bring the prices down by simply changing elements in the application that would push them up - for example, altering the customer's address, details of the car and claims history.

Between 2021 and 2022, the number of ghost brokers referred by LV to the City of London Police rose by 143%. The primary victims are the customers duped into buying fraudulent policies - who can lose thousands of pounds if their insurer voids their policy and declines their claim, as well as potentially facing penalties for driving uninsured.

Find out more: how ghost broking works

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Identity theft

However, ghost brokers have secondary victims - those whose identities are used to apply for the policies. This was the most common single experience of insurance fraud among the victims we surveyed.

For insurance alone, the numbers of cases referred to Cifas - an organisation founded to help prevent identity theft - rose by 15% in 2022.

According to Cifas, most of these cases relate to attempts to obtain insurance in a different name - most likely to make fraudulent claims or build a profile to establish an address history. A large number were also in relation to ghost brokers.

Find out more: how to protect yourself against scams

Victims of dubious claims

According to recent research by comparison website Compare The Market, drivers with an at-fault claim on their record pay, on average, 12% more than customers who haven't been involved in an accident - although this difference can be as big as 141% depending on where you live.

Worryingly, one in ten members we polled who claimed they'd experienced fraud, gave accounts of claims made against them for incidents they deny any involvement in.

CASE STUDY

Admiral apologises for settling fraudulent claim

In May 2019, an Admiral customer was notified that his Volkswagen Caddy had, some weeks earlier, hit another car. The third party supplied photos showing the Caddy parked on a street - its front bumper in contact with the other car's damaged rear.

After a 16-month exchange, Admiral paid the £1,100 claim - its lawyers explaining that the images would probably sway a judge in favour of the claimant if the matter went to court. This was despite significant room for doubt of the evidence. The pictures themselves don't show if a collision actually happened - or if so, how.

In fact, an independent engineer's report - commissioned by Admiral - concluded that the claimant's damage wasn't consistent from contact with the Caddy. The claimant said they'd spoken with the driver and, while they hadn't described them, Admiral's customer was named in the court claim form. However, he tells us (and told Admiral) that he hadn't been using his car that day, and would have been able to prove this had he been asked to do so at the time. His daughter had been using the car with a passenger - neither of whom were described or mentioned by the claimant. She also categorically denies the event and having met the other driver.

Admiral's customer and his daughter were adamant that the claim was fraudulent and wanted the case to go to court.

When Which? contacted Admiral it told us it was 'genuinely sorry' that the customer was unhappy, commenting: 'It's not in our interest to just settle a claim that is possibly fraudulent.' It explained 'fraud is a serious allegation and difficult to prove,' with courts 'not quick to make such findings which can lead to criminal investigations, contempt of court proceedings and ultimately fines or imprisonment.' It added that had the case gone to trial, 'it's entirely possible that it would have been unsuccessful' - with the additional costs in turn affecting future premiums.

Since Which? contacted Admiral, it has apologised to the customer for failing to clarify details of the claimant's allegations after telling him (in 2020) that it would.

Some 11 of the 111 customers we surveyed claimed to have been falsely implicated in similar ways, with several expressing deep frustration at how little pushback their insurer gave.

One customer told us that they could understand why their insurer ultimately decided to settle a disputed claim made against them - but were particularly annoyed at not having been given any advance notice of the decision. Had they received this, they would have offered to take the case to court themselves - accepting any costs if they didn't win.

Find out more: how to dispute a car insurance claim

Four ways to help a claim go your way

Collect evidence: When you buy car insurance, you surrender to the insurer the right to act on your behalf. But in the face of an ambiguous allegation, any evidence you can offer the insurer could influence how far it will go to bat for you.
Find witnesses: Impartial witness accounts can be incredibly valuable - whether to confirm what happened in an accident or your whereabouts if you weren't there. Photographic or video evidence is also very powerful.
Use dashcam evidence: A recent Which? car insurance survey found that over a quarter (27%) of claimants said dashcam evidence played a role in confirming details of events in their claim. Importantly, if you think your insurer has missed something relevant, let it know.
Challenge decisions: Claims handlers can make mistakes. If you think your claim has been mishandled, make a complaint and, if needed, raise it further with the Financial Ombudsman Service. These steps aren't guaranteed to get you the outcome you want, but they are at least a way of having your claim re-evaluated.

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