Discussions are underway between the ABI and the government on the sharing of fraud data which could see benefits cheats and tax dodgers blacklisted by insurance companies.

The talks are looking at how information on fraudsters held by government agencies and other public bodies could be shared with the insurance industry.

The Serious Crime Bill, now going through parliament, would introduce new powers to disrupt crime, including improved data sharing between the public and private sectors.

Insurers said the information could be used to refuse cover to individuals, particularly if they had been involved in multiple scams against the public sector.

Chris Hannant, head of financial crime prevention at the ABI, said the discussions were at an early stage and would initially examine the type of information that the government would be willing to share with the insurance sector.

He said the discussions with the Home Office were unlikely to progress until the passing of the Serious Crime Bill later this year.

Hannant accepted that the information could be used to ‘blacklist’ fraudsters. He said: “One option is not to provide cover to people who are defrauding government bodies. Alternatively companies could monitor individual claims more closely.”

Fraud costs the insurance industry about £1.6bn per year, according to the ABI.

Many insurers contacted by Insurance Times welcomed the idea of blacklisting serial fraudsters.

Graham Gibson, director of claims at Groupama, said: “I know some people may see this as wrong but I’m scratching my head to think what might be wrong with that?”

Mihir Pandya, fraud manager at Allianz, said data sharing that could help insurance companies shield themselves from repeat offenders would be welcome.

He said: “If the industry has preventative measures in place that, for example, they can vet before they deal, it can’t be a bad thing.

“Research shows what scares and deters people more than fines or police action is the fear of being blacklisted from achieving financial assistance such as loans, mortgages and insurance.”

But caution was urged in relation to how information from public bodies would be used by insurers.

Pandya expressed worries about the ramifications of imposing sanctions on first-time offenders.

Chris Hill, head of claims fraud for Norwich Union, agreed a database might highlight suspicious claims however he said it must be done in a legal and appropriate way.

Hill said: “We have to look at each claim on its own merit. Even reformed fraudsters may have insurance needs.”

Hannant said there needed to be consideration of how the information would be fed into the insurance industry.

One route was through fraud prevention service CIFAS, although not all insurers are members. Another route would be the Insurance Fraud Bureau, he said.