An IFB report reveals that fraudulent claims are thriving despite better prevention
Cash for crash scams cost the insurance industry £392m per year. The scale of the problem, which was revealed in an Insurance Fraud Bureau (IFB) report last week, comes despite efforts to clamp down on it.
The IFB is an insurance industry-funded organisation. It was set up in 2006 and has overseen 739 arrests for, among other things, cash for crash scams, particularly those where a crash is faked: see box right.
In 2012, IFB-led operations have resulted in 129 cash for crash fraudsters being arrested. But despite its efforts, the IFB report shows that cash for crash is thriving. So why is progress so slow?
IFB director Phil Bird said: “It’s difficult to get these guys; some are easier to spot and move on quickly, others are more sophisticated.”
At the sophisticated end of the scale, cash for crash criminals operate in a number of ways, and they are getting smarter.
For example, a new twist has been developed on the ‘slam-on’ method.
Hill Dickinson director of intelligence and complex fraud Chris Hallett said that because the public is increasingly aware of this scam, some gangs are now using two vehicles to create a crash.
He said: “One driver suddenly cuts up the other one, which appears to give him a legitimate reason for stopping suddenly in front of the innocent driver.”
Another gang Hill Dickinson has investigated had been using the slam-on method, but after insurers noticed an anomalous spike in accidents at one particular London roundabout and stopped paying out claims, they changed tack.
It’s difficult to get these guys; some are easier to spot and move on quickly, others are more sophisticated”
Phil Bird, IFB
Hallett said: “They switched to taking out policies on cars that were being advertised for sale. They bought the policies on fake credit cards and then claimed they’d had an accident when they had never even touched the car.”
Opportunistic, one-off fraudulent claims are also part of the problem: for example, where people claim for a fake injury, such as whiplash.
However, organised gangs that make repeated, systematic fraudulent claims are a much bigger problem. The average value of such organised scams investigated by the IFB is £1.7m.
Hallett said: “Massive amounts of money are lost each year because of gangs who do this as a full-time job.”
Indeed, according to the IFB, one in seven personal injury claims are made by organised fraudsters. Hill Dickinson investigates between 30 and 35 such gangs every year, but Hallett said: “I’m under no illusion: what we have done so far is just the tip of the iceberg.”
The IFB’s recent report lists a number of successful investigations that took place this year.
These include a live operation, code-named Dino, in Wales, in which 40 people were arrested for attempted fraud worth an estimated £1m. Under Operation Contact in Lancashire, approximately 50 men were convicted in August. Ringleaders Asif Mallu, Rezwan Javed and Rehan Javed received prison sentences totalling 13 years for attempted fraud worth £2m.
The IFB’s Bird said: “Huge strides have been made in the past year to two years.”
An AA spokesman said: “The smashing of some significant fraudulent cash for crash scams over the past couple of years is welcome and it underlines the fraud detection work being done by the insurance industry, the IFB and the police.”
Another positive development is the establishment of the Insurance Fraud Enforcement Department (IFED), a police unit dedicated to tackling insurance fraud. The unit, which was set up in January 2012, has 34 detectives and financial investigators. By November 2012, it had made 250 arrests, which had resulted in seven convictions, including some custodial sentences.
Insurers and claims managers also investigate potential fraud, and some successes can be noted this year.
Equity Claims and its law firm Hill Dickinson, for example, uncovered a £1m fraud ring involving 155 claimants. Liverpool Crown Court found that four of the five claims at trial were fraudulent. The claimants were ordered to return the claims paid out and pay Equity’s costs.
Some fraudsters are getting around the fact that their names are known to insurers. An Ageas spokesman said: “Fraudsters are recruiting individuals with a genuine footprint, that is, they are using a real name, address, banking details. This makes it harder for insurers to identify when a customer is not genuine.”
He adds: “Another increasingly common tactic is the use of identity fraud, using another person’s personal details to make it harder for insurers to spot them.”
In addition, bogus claims management companies can appear and disappear without a trace. Bird said: “They are unlikely to register with Companies House.”
Ahead of the curve
The solution to defeating the cash for crash perpetrators will be to stay ahead of this fast-moving criminal enterprise. An Ageas spokesman said: “Tackling fraud can be like a game of chess: while we are planning our next move to catch the fraudster, they are planning their next move on the industry.”
The IFB has some way to go before it can call checkmate.
Increasing public awareness is key
Insurers want public awareness of cash for crash scandals to increase.
This follows the findings of an IFB report, which revealed that one in 12 people (8%) would consider taking part in a cash for crash scam for financial gain.
More than half (53%) of people believe cash for crash fraudsters are unlikely to be caught, according to a study by Ipsos MORI.
Three-quarters of the population (74%) think cash for crash is a very big, or fairly big, problem in the UK, with 84% of UK road users worried about their insurance premiums rising to cover the costs of fraud.
Eight out of 10 motorists (78%) are concerned about sustaining injuries in a deliberately caused crash.
IFB chairman David Neave said: “The findings of this research are a reminder to the insurance industry to continue tightening the grip on fraudsters and dispelling the myth that insurance fraud is a victimless crime. Cash for crash fraudsters are being caught and jailed every week and the public needs to know that the risk outweighs any potential reward.
“Awareness about the consequences of committing fraud needs to be increased so that everyone, in particular vulnerable groups, turn their back on insurance fraudsters organising ‘cash for crash’ scams.”
Allianz’s head of technical claims Martin Saunders said: “Motorists involved in low-speed incidents where a car brakes suddenly in front of them should be sceptical that what has happened is a genuine accident.
“The people who organise these incidents are a danger and must be stopped.”
Databases are a tool against fraud
Insurers have been urged to increase data sharing as the effort to combat the cash for crash problem gathers momentum.
The Insurance Fraud Register, which was launched in September, enables insurers to identify potential fraud when a claim is made in association with a name, address or phone number that has been linked to insurance fraud.
Other databases are also available, such as Hill Dickinson’s Netfoil, a counter-fraud intelligence database with details of more than 50 million claims records, and data sharing tools, such as the Claims and Underwriting Exchange database, which, when implemented at the quote stage rather than claim, identifies potential fraudulent cases.
An Ageas spokesman said: “Insurers and brokers can now access information about an individual’s past claims and identify any trends that may cause concern early.”
IFED is also about to launch its vehicle license-checking system, which insurers and brokers will be also able to use at the point of issuing policies.
However, Hill Dickinson director of intelligence and complex fraud Chris Hallett said insurers need to share more information with the various databases. “Some insurers contribute to all of them, some to a few and others to none.”
Fraud values and operations
Operation Saisir £6.5m+
Two men operating a dodgy claims management company orchestrated fake accidents in London, resulting in more than 250 fraudulent insurance claims in one year.
Operation Hydra £3m+
Two men were jailed in 2009 for submitting more than 300 fraudulent insurance claims for ‘ghost accidents’ - accident that had not taken place.
Operation Contact £2m+
Fifty men were convicted in Manchester, including Mohammed Patel, a stooge driver who caused more than 90 accidents in three years.
Operation Dino £1m+
Forty arrests were made in an ongoing investigation into a suspected cash for crash gang who staged accidents in Wales.
Talking points …
● Will a crackdown on cash for crash fraudsters result in a fall in personal injury claims?
● Should the industry invest more time and resources into identifying cash for crash criminals?
● Will more high-profile cases help deter fraudsters, and what can the ABI and IFB do to raise public awareness of cash for crash operations?