ABI's figures 'don't stack up' on insurance fraud

If all sides worked together and offered transparency over data and measures taken, they could create a 'best of breed' system to tackle fraud once and for all, says Andrew Kay, director of operations at First4Lawyers.

One insurance fraud is detected every minute according to the Association of British Insurers (ABI).

As per, the blame for this fraud is laid firmly at the door of claims management companies (CMCs). The ABI's director for general insurance policy, James Dalton, is quoted as saying: "The rise in opportunistic motor fraud highlights that the stricter regulation of claims management companies, some of whom encourage dishonest claims, cannot come in soon enough."

So, let’s unpick this, as the ABI’s own figures just don’t stack up. They quote 562,000 incidents of insurance fraud uncovered in 2017, but that only 113,000 (20%) relate to dishonest claims – and that includes all types of insurance claims not just motor claims.

So, how can CMCs be the main factor here? The insurers themselves are a bigger problem as it would seem that the vast majority (80%) of insurance fraud comes from activity in the sales process – something controlled by the insurers. Surely an indication that they themselves create the conditions which permit fraudulent activity on a much wider scale?

Interestingly, the ABI has failed to make any reference to the recent update issued by the Claims Management Regulator (CMR). Our reading of the review is that any insurer that has been offering intervention services to innocent third parties who do not have an insurance policy with them has also been operating as an unauthorised CMC.

So, amidst all the noise and fury from insurers about the activities of CMCs and claimant lawyers, it’s often the insurers themselves who are the main culprits. More importantly, seeking out PI claimants in this way, unless the client has provided consent to receive such marketing, and then passing on to a solicitor is putting the solicitor at risk of breaching SRA guidelines.

I would suggest the insurance industry starts by putting its own house in order rather than suggesting that fraudulent activity is a problem arising solely from CMCs. With fraud being an area affecting all parties, surely the best way forward for us all is to stop the propaganda and adopt a collaborative approach? If all sides worked together offering transparency over data and measures taken, we could create a ‘best of breed’ system that would enable a fulsome crackdown on those who play the system for once and all.