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Insurance fraud cases rise as Europe faces recession

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With the economic downturn continuing across many European countries and the current economic climate in the UK, fraudulent claims are on the rise. According to a recent article by the Guardian, the level of fraud on mortgage and insurance policies has more than doubled since the credit crunch in 2008 – causing huge losses to the industry of about £2 billion a year and resulting in higher average premiums for consumers.

The severity of fraudulent activities varies across Europe and ranges from common motor insurance practices such as parents insuring their children’s cars in their names to save on premiums, exaggerated or non-existent personal injury claims to various kinds of additional or fictitious accident claims: a recent study by the Association of British Insurers has shown the UK to be the “Whiplash Capital of Europe” with 1500 people falsely claiming to have suffered whiplash, despite the number of car accidents falling.

In Southern Europe, where the on-going economic recession has affected larger parts of the population, cases of insurance fraud are becoming more severe: as The Times has reported last week, a Spanish man cut off his hand claiming to have lost it in a car accident in order to be eligible for medical benefits. Fraud investigators became suspicious since the amputation was carried out too precisely.

In the meantime, insurance companies are investing large amounts of resources to discover innovative anti-fraud strategies and to prevent fraud cases early: in 2012, the Insurance Fraud Register has been launched in the UK, a platform for fraud data sharing across various industries which should work as a deterrent for potential fraudsters and facilitate automated reporting to the police. As costs of reporting fraud to the police often outweigh the benefits, private investigators are also widely being used to collect sensitive information for court trials.

With forecasts for 2013 and 2014 predicting a further rise of insurance fraud cases, industry-specific seminars and conferences instructing insurers about the latest fraud techniques, prevention methods and tools are booming – to hopefully tackle insurance fraud at the front end.