Policyholders that fraudulently ‘add’ items onto a genuine household claim formed the biggest volume of claims investigated in the first half of 2013, according to VFM Services.
The Fraud Index, which compiles data based on the household claims it receives from the insurance industry, reveals that three in ten (29%) claims investigated were uncovered as being potentially fraudulent, saving the insurance industry a staggering £3.4 million in 2013 to date.
The ‘multiple items’ category is mainly made up of people that are claiming for a theft to property, or burglary, and the value of claims has risen dramatically over the past year. Sixteen percent of these types of claims investigated were rejected by the insurer or by the customer walking away, because the circumstances of the loss are usually found to be genuine, and only part of the claim is rejected by the insurer, due to exaggeration. The walk away rates tend to be lower because there is more money at stake, and so the customer is more likely to pursue the claim. This explains why the overall claims values are higher, and therefore the resultant savings to the insurer.
Therefore, VFM has found that as people think they can ‘get away with’ claiming for additional items, and more often than not the genuine part is still paid out, not only have the volumes risen, but also the claims value. There appears to be a trend that people are increasingly trying to push their luck by claiming additional items on their genuine event, and for that reason VFM introduced multiple items as its own category as part of the Index in 2012.
Multiple items category – 2012 – 2013
|Q1 2012||Q2 2012||Q3 2012||Q4 2012||Q1 2013||Q2 2013|
|Average claims value||£1,830.71||£1,821.98||£1,712.23||£1,848.99||£3,099.45||£3,287.95|
Sally Griffiths, Director at VFM comments: “Exaggeration of a claim is increasingly becoming an issue in the industry, and the problem is that there are no consequences to people ‘trying to give it a go’. Some insurers may still pay out for the genuine part of the claim, even if they have found that there was an additional camera, or laptop that was fraudulently added onto the list of items stolen. This is the reason why we have not only seen volumes rise, but also the value of the claims, as more and more fraudulent items are being added onto a genuine claim.”
Another key pattern uncovered from the Fraud Index concerns TV claims. Potentially fraudulent claims rise in years that are big years for sport. For example, in 2011 – not a big year for sport – 3,112 TV claims were investigated, of which 46% were not settled by the insurer = 1,431 claims. Last year, which saw the Olympics, 5,195 TV claims were investigated, of which 41% were not settled by the insurer = 2,129 claims.
This year, to date, again, not a sporting year, the number of claims have decreased, to date, 1,447 TV claims were investigated, of which 36% were not settled by the insurer = 520 claims. If the remainder of the year remains at similar levels, predicted potentially fraudulent TV claims will be 1,040. In 2014, the UK will be hosting the Commonwealth Games, the World Cup is taking place in Rio, as well as the Tour de France beginning in Yorkshire, so based on historical trends, VFM predicts that fraudulent TV claims will again, rise dramatically.
Griffiths continues: “It’s interesting to see how external events and circumstances affect the level of fraudulent claims that we investigate. We know that sporting events, as well as times of the year like Christmas means that people will try and get a new appliance, and in order to do so without having to pay out, opportunists look to their insurance to provide their new item.
“Insurers can use this intelligence to monitor the claims that they receive, and can pay more attention and dedicate more time to investigating those that they predict could be fraudulent. We need to ensure we are putting together a united front, to promote the message that as an industry we are investigating all claims and we know when fraudulent behaviour is likely to happen!”
VFM Fraud Index
|Ranking – fraudulent claims by volume||Type of claim||Average claim value (Q2 2013)||Average claim value (Q1 2013)||Average claim value (Q4 2012)|
VFM uses a combination of psychology, communication skills and conversation management techniques to distinguish between genuine and fraudulent claims.
Working with the University of Portsmouth, VFM has received the University’s accreditation for its New ERA training course in Conversation Management. Furthermore, VFM is the only supplier of conversation management who can offer Accredited Counter Fraud Technician (ACFTech) qualifications to its clients.