Insurance fraud faces crackdown: ABI aims to eliminate false claims

Twenty million households in the UK can expect reductions in their annual insurance bills of up to pounds 20 a year if an initiative launched this week by the Association of British Insurers is successful.

The Association has launched a multi-million pound project aimed at eliminating an estimated pounds 400m of insurance fraud by electronically tracking people who make multiple claims.

The cost of insurance fraud is inflating premiums by 3 per cent a year and is estimated to cost each insured household an extra pounds 20 annually.

Mark Boleat, ABI director- general, said: 'We believe that the climate of opinion on insurance fraud has changed tremendously. It is no longer accepted and is no longer seen as a victimless crime.'

The system, Comprehensive Loss Underwriting Exchange (Clue), is initially being backed by the top 20 insurance companies, which control 70 per cent of the insurance market, including Royal Insurance, General Accident, Commercial Union and Sun Alliance.

Only those companies backing the system will be able to use it to check policyholders.

Clue will start off carrying data on household insurance claims, but will be extended to include motor and holiday insurance claims. Eight million records per year will be added to the database, which will also be retrospective, aiming to pick up people who have made multiple claims over the past three years.

Any suspected fraud cases picked up in this way will automatically be referred to the police for investigation. The system will not pick up people who have inflated their claims.

Clue will be able to check information on policyholders when the proposal forms are complete and when the claims are received.

The introduction of the fraud cracking system, however, has raised some fears that people who have made a lot of claims may become uninsurable.

Jean Eaglesham, Consumers' Association head of money policy, welcomed the initiative but said: 'There is a real concern that certain groups of people will find it very difficult to get insurance cover.'

The Insurance Ombudsman deals with around 6,000 disputed general claims a year.

A third of the disputes were settled against the insurance companies. The complaints ranged from people who had had their claims refused through to people who had suffered a reduction in the amount they were claiming.

Research from the ABI on 1,000 adults this week found that out of 100 new applications for motor and household insurances on average only 63 were thought to be completely honest and truthful.

Out of every 100 claims, the public believed on average that 35 were completely false and untrue, and 57 were thought to exaggerate to increase the claim.

Eighteen per cent knew of someone who had put in a false or exaggerated claim in the past three years, and 54 per cent thought that the most important factor in evaluating premiums would be the claims experience of the individual.