Insurers pay out for small claims “encouraging others to con”

Luke Johnson of private equity firm Risk Capital Partners has warned of an epidemic of fraud claiming “industry is enduring an epidemic of crime right now, as integrity becomes a casualty of the recession”.

In the FT Johnson writes: “The hospitality trade is suffering a plague of legal letters from claimants looking for free money. No doubt some are genuine; but others are trying it on, I am sure, because they are feeling the pinch, and think negligence claims are easy money.

“Last year, the Association of British Insurers reported a 17 per cent rise in fraudulent insurance claims. I fear the increase this year will be even greater. Unfortunately, insurers often settle small claims even if they are doubtful, simply to save legal fees and administrative bother. But this policy of expediency only encourages others to try the same con.

Thefts rise too

Johnson said: “We have had trouble with several thefts of large sums of cash from branches this year, all carried out by insiders. In each case those responsible have been caught.

Friendly fraud?

Joghnson said: “I have been reading about the rapid rise of “friendly fraud”. These are cases in which online or mail-order customers falsely claim that goods were never sent, or recipients return the wrong items for a refund. The customer obtains a credit card chargeback and the vendor is out of pocket.”

He cautioned against using euphemisms for such thefts.

At least expenses are safe

“In Britain at least, fiddling expenses will never be seen in the same forgiving light after the past month of political exposés in Westminster,” he said.