Change in crash for cash approaches and the newly launched whiplash reforms means it is ‘vital’ insurers adapt and ‘review their frontline defences’, adds fraud team partner

Entire lifestyles have been fundamentally altered by the Covid-19 pandemic, due to the likes of furlough, job losses and remote working. Many individuals will therefore be “stuck with expensive car finance plans for a vehicle that is no longer required and will be exploited by unscrupulous enablers”, said Ben Leech, partner in the fraud team at law firm Keoghs.

He continued: “This, twinned with the new whiplash reforms and the challenges to the insurance industry in implementing wide-ranging change, means that more than ever, claims need to be validated as soon as possible.

“With such reforms, fraudulent claims may no longer involve personal injury (PI) or credit hire, so it is vital that insurers adapt to these changes and review their frontline defences.”

Crash for cash evolution

Speaking exclusively to Insurance Times about how crash for cash scams have evolved, Leech explained there is now a “strong opportunistic basis” for fraudsters’ focus to shift onto targeting individuals under financial pressure with upcoming balloon payments on car finance plans.

This could be in the form of an organised criminal offering to take the individual’s car away and stage an accident so that their “finance problem will be dealt with” - this could become a “key driver” in an increase in bent metal claims too, he added.

A balloon payment is the final lump sum an individual has the option to pay if they want to own the car listed on their finance agreement.

Leech continued: “From the enabler’s perspective, what happens [then] is that they end up with a vehicle that’s finance free and in perfectly good working order, so that can be sold on quickly for profit.

“On the back of that, a number of these cars will have the benefit of gap insurance, which is often involved in the dealership now when you take up these cars”.

So, if the car is written off because of the “staged incident by an engineer, then you can claim on that gap policy as well – it’s almost as if you can claim twice”, he explained.

Gap insurance helps pay off car loans if a vehicle is stolen or totalled and the insured owes more than its depreciated value.

Leech said: “What you may well see is orchestrated enablers who are able to almost offer that as a service.”

Insurance industry pressure

Considering bent metal claims, Keoghs has also seen an increase in accidents involving self-drive hire vehicles where the car, for example, is hired and driven into another vehicle, purely with a view to facilitating that vehicle being written off.

Leech continued: “Historically, obviously those personal injury claims were massaged into that claims process with the credit hire and everything else, but I think now it’s much harder to get more money out of the personal injury side of it because of the tariff – a three-month personal injury claim now is only worth £240.

“To a certain extent, that doesn’t give you the additional profit that you would have liked in the past and it will require more scrutiny. So, I think that we may see a removal of those PI claims.

Furthermore, Leech wondered “where [bent metal claims and gap policies] may well go and organised groups being able to facilitate that for individuals, so making themselves known within the community and taking them away and doing that for them”.

One method that can help deter fraudulent bent metal claims and cash for crash incidents is using technology because “clear and uncontroversial evidence in the way of dash cam footage will be incredibly useful”, said Leech.

He added: “The critical thing is getting that evidence captured and getting it submitted to the insurers as quickly as possible because now that we have the new reform rules in place and the requirement for these claims to be investigated within 30 days, the pressure on insurers is absolutely there.

“So, they need to be on the forefront, working with their policyholders to make sure that information is being submitted to them as quickly as possible.”