More than 1,000 people have called a fraud hotline set up to encourage members of the public to report insurance cheats.

The system launched by the ABI has resulted in a number of referrals to individual insurers or the police. Top of the list amongst those reaching for the phone are neighbours.

One woman who claimed for a bathroom suite which was allegedly damaged by fire admitted she falsified her claim after being informed on by her neighbour. She had wanted to use the claim money for a holiday.

In another case, a neighbour reported his suspicions when, following an alleged burglary, he saw the claimant's brother-in-law returning with a lorry to "drop back" the stolen items.

In another development, Groupama Insurances is set to issue the ABI Fraud-Check leaflet to an estimated 300,000 personal lines policyholders.

The leaflets are supported by posters which Groupama is supplying to intermediaries so they can also communicate the message to their customers.

Last year the cost of insurance fraud was estimated at £645 million. It is thought that premiums could drop by up to 10 pence in the pound if fraud is reduced, according to Groupama.

Paul Fakley, marketing services manager for Groupama personal insurances, said: "Some people think that insurance fraud is easy money and fail to recognise it as a criminal offence. By distributing the leaflet we hope to make our policyholders aware of the full implications of insurance fraud."