Donna Scully, director of Carpenters Group, explains how high cost of living expenses in the UK is affecting opportunistic and application fraud in the insurance sector

At our final Fraud Charter meeting of 2022 in December, we discussed the important issues that need to be on the anti-fraud agenda in 2023. The cost of living crisis was at the top of this list.

It’s well reported that during an economic downturn, peoples’ behaviour can change due to the desperation of being unable to make ends meet.

Donna Scully 2020 Headshot

Donna Scully

A worry in relation to insurance is that customers think this is something they can easily cut from their outgoings. Education is important here to highlight how vital insurance is, the protection it brings and how vulnerable customers can be without it.

Another concern is people exaggerating or adding elements to claims for extra money. The type of person who might exaggerate claims could also change to include more middle class customers, who - before the crisis - were able to make ends meet better.

With the cost of most things going up, including mortgage payments, the pool of people struggling is expanding all the time.

Consumer lending and debt on credit cards went up 31% last year and is expected to peak at 38% in June 2023. Furthermore, credit card borrowing has soared to its highest level since 2004. With qualifying criteria for obtaining credit becoming harder, we’re seeing more application fraud too. New enquiries for a credit card were up 42% last year, compared to 2021.

The cost of living is pushing people to find cheaper deals too, so ghost brokers are getting more traction. Prosecutions of ghost brokers are very low, under 0.5%, as the people targeted are often too embarrassed to seek police assistance.

There’s a feeling that as the cost of living deepens this year, fraud will snowball.

It’s never been more important for collectives like the Fraud Charter to continue, so that we can work together as an industry to share information and data – this will help ensure we are vigilant, spotting trends and stamping out fraud to protect genuine customers and offer competitive premiums when they are most needed.

Things will get worse before they get better.