It seems that crooks are busier than ever, especially when cars are involved. From car key theft to ‘crash for cash’ rackets and so-called ghost brokers, it is always the insurance industry that suffers. Insurance Times looks at the latest trends and how companies are fighting back

Nowadays it is almost impossible to steal a car without a key – but insurers are still locked in a full-scale war with fraudsters and car thieves.

Advancing technology has, on the face of it, made people’s possessions less vulnerable, yet vehicle criminals and those using cars to get money from insurers seem to be more active.

One of the most striking changes of recent years is the growth in car key burglaries. The insurance industry has worked with motor manufacturers to improve security, and the days when a thief could hot-wire a vehicle’s ignition have virtually gone. Car thieves have worked their way around this inconvenience by simply stealing the keys first (see case study).

According to figures from vehicle tracking service TRACKER, in the first quarter of this year 80% of the vehicles it recovered were stolen using the owner’s keys, up from 74% just three months previously.

The good news is that the overall number of stolen cars dropped by 14% during 2008/09, according to the British Crime Survey published by the Home Office, and there has been a slight decline in muggings for car keys. However, the number of car thefts following keys being stolen in a burglary has risen steeply. Former home secretary Alan Johnson told the House of Commons in February that, in 2008/09, 19,400 cars had been stolen this way, a 19% increase on the previous year. That’s 53 a day.

The AA estimates that cars worth a total of £194m are stolen off driveways every year.“It has been growing for four or five years,” says the AA’s public relations manager, Ian Crowder. “The keys are the weakest link in the security chain. Thieves will use all sorts of techniques: they break into the house while people are asleep; pop in while they’re mowing the lawn; use a fishing rod through a letterbox to hook the keys from a hall table, or a house might be comprehensively burgled while the owner is on holiday. In one case, we had three cars stolen from a locked garage, though that’s the exception rather than the rule.”

Car key thefts in burglaries may be opportunistic – a sneak thief grabbing just one more item – or they may be the result of a gang going after a certain make of car; BMWs are particular targets.

“Those setting out to steal a car will do it more discreetly,” Crowder says. “They want as much time as possible between the theft of the car and the discovery that it has gone. They’re more likely to do it in the evening when people are going to bed, for example.”

Newer technologies have even made it easier for thieves. Once they have the keys, all they have to do is walk up and down a road, clicking the remote until a car responds with a tell-tale clunk and flash of the lights.

Criminals have also moved into other areas, taking vehicles from farms and building sites. “Tractors are valuable commodities: some can be worth £100,000,” says loss adjuster Cunningham Lindsey’s complex technical services director, Cath Williams. “Even those that are heavily used and quite dated are very much in demand in Asia or eastern Europe. Over the past 12 months, we have become really quite busy with these claims.”

In 2008, the Plant and Agricultural National Intelligence Unit was set up to address this problem. Its annual report for 2009/10 estimated that up to £1.5m worth of construction and agricultural equipment is stolen every week, with 12 items reported stolen every day.

Fraud on the rise

Criminals are also turning increasingly to fraud as a way to make money, usually working in gangs.

In two weeks’ time, the ABI?will publish its latest statistics on proven insurance fraud, and the figures are expected to be worse than ever.

“I would be absolutely shocked if we don’t see an increase on last year’s figure of £730m,” says AXA UK group fraud risk manager, and Insurance Fraud Bureau (IFB) board member, Richard Davies. “I’d be looking for a fairly significant jump on that – over £750m at least. It could even go over £800m.”

Last year’s figure was 25% higher than the 2008 total of £580m. If Davies’ worst-case scenario is right, that will mean an increase of nearly 40% in just two years. While the statistics will cover the entire insurance industry, motor fraud will comprise a significant proportion of the total. Given the parlous state of the motor market, with total private motor combined operating ratio at 122% in 2009, it is a cost insurers can ill afford.

Over the past decade, the profile of car criminals has darkened from isolated opportunists to large, well-organised groups committing fraud and theft on an almost industrial scale.

Insurers are facing more staged accidents, or “crash for cash” schemes: “I wouldn’t say it was at epidemic proportions, but it’s not far off,” RSA’s counter-fraud manager, John Beadle, says.

New tricks, new traps

Beadle reports that his company has recently installed Detica’s NetReveal technology to identify organised rings at a much deeper level. “It breaks every policy down into individual entities and looks for links between them. They could be under a completely different name and address but using the same email address, and the technology will link them. We are detecting substantially more – really significant increases. The difficulty we’ve got is telling whether there is more fraud or whether we’re just seeing more.”

Other new tricks target not cars, but insurers themselves. Beadle is seeing an increasing number of “aged PI claims” where people who were involved in accidents several years ago suddenly complain of whiplash. “That’s one we are experiencing an awful lot,” he says. He is reluctant to point the finger, but believes they are being traded within the industry. “Somehow, somebody is farming details of these claims to claims enablers. There is a known market out there.”

There is also an increasing incidence of fraud at the application stage, as the internet makes buying car insurance easier. The policies of those involved may be obtained under false pretences or with stolen cards or a fraudulent direct debit mandate. Once the insurer has issued a policy, it is obliged to pay the third-party claims costs – even if their insured turns out not to exist at all.

Beadle has noticed a growing trend of policy manipulation, and his conversations with other insurers back this up. “People can fish around online, changing key particulars such as no claims discount and details of previous accidents until they get a premium they like. It has become extensive.” He puts it down not to the recession, but to the increased awareness of automatic number plate recognition systems that can detect uninsured drivers.

Internet trading has also increased opportunities for so-called ghost brokers, often within immigrant communities, who charge a fee for arranging insurance for compatriots who may not speak English or hold a valid UK licence. “One thing they don’t do is tell the truth on their applications, so they get the cheapest policy,” Beadle says. “People think they are getting good value and that they are driving around fully insured, but when an accident happens, they’re not because they don’t have a driving licence. This is relatively new – the ease of obtaining motor insurance via the web tends to lend itself to this type of thing.”

The industry is fighting back: the IFB is planning to establish a database of proven fraudsters later this year, to enable insurers to identify repeat claimants. Beadle admits that it may simply be that RSA is now able to detect fraud that previously remained hidden.

Mind games

By borrowing techniques from policing or psychology, the insurance industry can not only detect fraud but anticipate it. Loss adjuster Crawford’s claims psychology director, Nikki Grieve-Top, is applying the theories of criminal psychology to staged accidents. This is particularly relevant, as gangs appear to be coercing new people who don’t fit known profiles.

Cunningham Lindsay’s Williams, like Grieve-Top, used to work for the police and specialises in applying “an intelligence-led approach” to organised motor claim fraud. “There is often a lot of analysis that you can do before you conduct field investigations,” she explains.

“This means we’ve already done our homework, and it’s a tactical investigation rather than scattergun. We give our investigators as much ammunition as possible.

“We can make associations between parties involved in the claim, understand what their claims profile is like and whether they use any other names. A lot of useful information can be obtained from publicly held records.”

Since she joined the insurance industry 18 years ago, Williams has witnessed leaps in both the scale and skill of organised fraud. Now, with a growing criminal community who are experts at defrauding insurance companies, she believes a more professional approach to detection is the only answer.

“We’re not trying to do the police’s job. We’re trying to apply a level of expertise and specialism that has been missing.

“The industry hadn’t realised how much of a target it had become for organised crime. But insurance is such a target, we can’t expect the police to do all of our investigations for us.”

Williams warns that no matter how adept insurers become at detecting fraud, they will always have to be vigilant, with criminals reinventing themselves all the time.

“The industry is still very much a target for fraud, it will only go from strength to strength.” IT

Case study

The Attfields were away for the weekend when the police called. “They said they thought there’d been a break-in,” explains David Attfield, an in-house solicitor for the BBC. “A neighbour called them and said a window had been broken and the door was open. It looked like someone had gone through our stuff.”

When they returned to their house in north London, Attfield noticed immediately that the keys to their 18-month-old Fiat 500 had been taken. The car was missing from outside the house. He suspected too that the spare key for the other car, a “crappy old hatchback" which the Attfields had been driving, had also disappeared.

The family made a point of parking along the road rather than outside the house, but a few days later the thieves stole that car, too. Attfield said: “You've got to keep a car reasonably close to the house or there’s no point having one. They must have walked up and down our road trying every car.”

The hatchback was later recovered from a street in Highgate, but the family weren't so lucky with the Fiat, despite a couple of sightings.

Around a week after the theft, the Attfields received a parking ticket with a photo of the car parked on that same street in Highgate. By the time they got there, it had gone.

A month later, when Attfield was searching for a replacement, he saw his Fiat advertised on the Gumtree and Auto Trader websites.

“It was so obviously my car: it was bright green with exactly the same specification. It's a distinctive colour: Fiat discontinued the green soon after the launch, so we know they were very rare. Also, it was for sale for £4,000, when it was really worth double that.”

Attfield and his wife phoned the seller and posed as potential buyers. The calls convinced them it was their car, so they reported it to the police. “Initially they were quite keen for us to view the car so they could arrest the seller, but then we got a call saying they didn’t think it was safe. Ultimately the police did nothing and I assume it was sold to someone else.” Attfield also tried their insurer, Swiftcover, but it couldn’t help either. The claim had already been settled for £7,850.

Attfield was dismayed by how easy it is to sell on a stolen car, and by how little support he and his wife received from the police. He says he will be a lot more careful with his keys in future. “When you think about burglary, you think about your computer and other stuff being stolen. You don’t think of your car – but of course it’s the most valuable thing you own.”