Different types of Insurance Fraud

What Is Insurance Fraud?

Insurance fraud involves the creation of illegitimate insurance policies or false claims against an existing policy. It occurs across the gamut of insurances, from home insurance to liability insurance, and can range from opportunistic claims to calculated, organised crime.

There are many different types of insurance fraud in the UK and, as it is such a prevalent form of fraud, insurance companies invest significant amounts into its prevention.

What Are the Different Types of Insurance Fraud?

There are as many different types of insurance frauds as there are types of insurance. Some of the more common types of insurance fraud in the UK include:

  1. Ghost brokers

Ghost brokers play the role of a legitimate insurance broker and sell ‘policies’ to unsuspecting victims. These policies typically fall into one of two categories: real insurance policies taken out with false information before being doctored and sold on, or fake insurance policies designed to look legitimate to dupe the buyer.

Neither insurance policy is valid or legal in this type of insurance fraud, leaving the policy-holder open to the consequences of not being insured. For example, in the case of car insurance, this could mean disqualification from driving.

Property insurance fraud

  1. Arson fraud

Arson fraud is when a home- or business-owner intentionally sets their property on fire in order to claim against their insurance policy. However, thanks to advances in technology, investigators can often determine the cause of a fire, whether or not it was started deliberately and even if certain items were on the premises at the time of the fire.

In 2018, a pub landlord was jailed for over four years after CCTV footage was uncovered of her starting a fire. The fraud was discovered by investigators after she had put in an insurance claim for the damage caused by the fire.

  1. Burglary fraud

A staged burglary is a type of insurance fraud involving a home- or business-owner’s fraudulent claim, either for a burglary that never occurred (or was staged), or using a potentially legitimate burglary to claim for an item they did not own.

  1. Staged water damage or mould

Similar to arson fraud, but less commonly known, this type of insurance fraud in the UK involves the intentional creation or worsening of water damage or indoor mould. This might be achieved by turning up the heat in a property, limiting ventilation and even deliberately spraying water around the walls or ceilings. This can also be difficult to prove in court, but investigators will look for damage in illogical areas or patterns.

Employer’s liability insurance fraud

  1. Commercial liability fraud

Employer’s liability insurance is a compulsory type of insurance in the UK for almost all workplaces, and most employers legally must be insured for a minimum of £5 million (although insurance companies often insure businesses for £10 million). Personal injury, illness and even death can be covered, and in certain cases, employers can be held to vicarious liability. Fraudulent claims can range from failure to carry out appropriate health and safety risk assessments to slips and trips or even wrongful disclosure of employees’ data.

Motor insurance fraud

  1. Vehicle theft

Fraudsters might have a friend steal (and subsequently crash) their vehicle, or sell it for scrap before reporting it to their insurer as stolen.

Fraudulently claiming against motor insurance for vehicle theft can be difficult, as many insurers will have specific exclusion clauses in their policies. These include if the owner is deemed not to have done enough to prevent the theft, or if the theft was committed by a relative or member of the same household.

  1. Car accidents

When making false insurance claims, car accidents tend to fall into one of three categories: staged, induced or ghost claims. You can learn more about each on our Banking and Insurance Fraud page but, in short, this type of insurance fraud involves false or exaggerated claims related to car accidents, such as ‘crash for cash’ and exaggerating/inventing injuries from a real crash.

Example Case

Take, for example, Mrs X, who was prosecuted for motor insurance theft. In her case, her defence was able to introduce reasonable doubt that she had made fraudulent claims against her car insurance policy as the court could not prove that it was Mrs X who had set up those policies or been part of the subsequent staged accidents.

This proves that the smallest detail – in this case, the fact that Mrs X had previously used a certain car hire company – can be pivotal in different types of insurance fraud cases.

If you or your client have been accused of one of the different types of insurance fraud, please contact us today to learn more or instruct our highly-experienced insurance fraud barristers.

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