Tackling insurance fraud – law and practice

Padding and false claims cost the UK insurance industry millions each year. Dexter Morse examines the shape and size of the problem and the industry’s response.

Dr Dexter Morse is CEO of Dexter Morse International Limited (www.dextermorse.com), a Swiss based company specialising in training and coaching in Fraud, Insurance, Reinsurance, Legal and Claims issues. He is the author with Lynne Skajaa of “Tackling Insurance Fraud: Law & Practice” published by Lloyds of London Press (www.informalaw.com/insfraud).

Scope

There is no doubt that the cost of insurance fraud is immense and it is probably one of the most pressing problems facing the insurance industry. Figures from the Comité Européen des Assurances (CEA), estimate the minimum total for insurance fraud in the 25 European countries it represents to be ?8 billion (UK£5.6 billion), which equals 2% of annual insurance premiums. However, statistics from individual European countries suggest that this figure is very conservative. The Association of British Insurers (ABI) estimates that fraudulent insurance claims on general personal lines business alone cost insurers in the UK in excess of UK£1 billion per year. In Italy, 4.58% of all claims are fraudulent, according to Instituto per la Vigilanza sulle Assicurazioni Private e di Interesse Collettivo (ISVAP), the insurance regulator. The German Insurance Trade Association, the Gesamtverband der Deutschen Versicherungswirtschaft (GDV), estimates that insurance fraud is costing German insurers ?4 billion a year (UK£2.3 billion).