Andrew Holt finds that negative attitudes towards financial companies are to blame for insurance fraud
Illegal immigrants and scroungers are the reason why personal lines fraud is so prevalent. This is the startling insight from an ABI report into insurance fraud.
And when it comes to a socio-economic group committing fraud, Middle England leads the rising figures.
This is particularly true among Londoners. Many, especially those among the 'Hyacinth Bucket' set committing insurance fraud, felt that they were 'paying for' those who were breaking the rules. This was perceived to be very unfair and a source of resentment and anger.
The key offenders were identified as: illegal immigrants, benefit scroungers, uninsured drivers and "real" insurance fraudsters, who made serial or large claims.
Chaps are as likely as chavs to squeeze the insurance industry as a way of getting back at society. All respondents felt 'ripped-off' in modern society to a greater or lesser extent - including those who had not committed insurance fraud.
Many spoke with bitterness and resentment about the financial burdens they had to carry and how they felt exploited by large companies and the government.
Alex Roy, senior economist at the ABI, says: "The perception used to be that insurance fraudsters lived in tower blocks. But our research shows that it tends to be middle-aged, middle-class, university educated homeowners who are more inclined to commit fraud."
Allianz Cornhill claims fraud manager Mihir Pandya says: "Honest policyholders resent subsidising those who cheat insurers just the same as taxpayers resent benefits cheats.
"They appreciate that such people are often engaged in widespread parasitic anti-social activities at the expense of those who live by the law."
The Thatcher period of government is seen as the prime mover behind the change in society's attitudes. All participants in the study felt that society has changed, moving from a loyal, trusting, disciplined, 'collective' way of behaviour, to a more individualistic, liberal, yet disloyal mode of social interaction.
Negative attitudes to financial companies, especially insurers, created a feeling that they are there to be taken for a ride. In addition, it was felt the growing compensation culture was exacerbating the breakdown of trust.
"Some policyholders do tend to be more upwardly mobile and, more than ever, they see an opportunity to exploit the system," says Roy.
In a psychological study of those committing fraud, the ABI outlines, in terms reminiscent of a crime novel, five types of culprits: the exploiters, revenge seekers, games players, tentatives, and the honest.
The 'exploiters' are the most open to committing insurance fraud - even going so far as to make up false claims. They resent insurance and try to get as much out of it as possible. They have no respect for insurance companies at all. They also tend to be highly assertive, opinionated and are often angry and resentful.
Exaggerated claims
The 'revenge seekers' have had previous negative experiences with insurance, perhaps having had a claim refused or reduced, and therefore take opportunities to claw back what they feel is rightfully theirs.
However, they do not go as far as making up insurance claims, but rather exaggerate genuine ones. 'Revenge seekers' are generally more cautious than 'exploiters' - but they are angry and bitter and feel under pressure socially and financially.
The 'games players' are open to exaggerating claims and not being truthful about meeting the terms and conditions of policies. However, they would not make up a claim. They tend to see insurance as a game - and one that they want to win. They tend to be extrovert males, but are not as angry or manipulative as 'exploiters'.
The 'tentatives' are very hesitant about insurance exaggeration (not seeing it as fraud unless prompted). They could be encouraged into small-scale exaggeration by others, such as workmates and partners. They tend to be women and have a sense of guilt/morality about what they are doing, but are led astray by others.
The 'honest' have strong moral views that not being truthful in any way about insurance, constituted fraud. They are restrained from committing any fraud by two factors: a personal moral code and a fear of being caught, coupled with an assumption that this would be likely.
The 'honest' tend to be calm, relaxed and in command of their lives.
They are often internet-literate and would shop around for financial products.
Questionable conclusions
Fraud on motor, contents and travel insurance has been estimated to cost UK insurers over £1bn annually.
But Pandya questions the report's conclusions: "The research still places those who commit fraud in the minority. Therefore, fraud is not a natural reaction to consumer frustration."
Norwich Union head of claims fraud Chris Hill goes further, disagreeing with the central thesis of the report that the middle classes contribute to fraud. "This is not our perception at all and not borne out by our experience."
Hill accepts that the way some insurers deal with claims does create huge discontent. "Some insurers take an aggressive 'you have to prove it' approach when dealing with a customer claim and this does, understandably, get people's backs up."
He suggests that Norwich Union claims handlers focus on understanding the claim and are usually in a better situation to make a judgment.
"Insurance is about security. And when there is a claim we need to listen, not be confrontational," says Hill.
Variable prices
A number of other factors were also cited as contributing to the acceptability and incidence of insurance fraud. These include pricing.
Many respondents felt that insurance price quoting was variable, with a different quote given depending on when you called.
Although dynamic pricing is a feature of the competitive nature of the insurance market, it resulted in a sense that pricing was elastic and that there was no true price for the product.
The 'shopping around' culture was not viewed as a positive and a number of people believed that a breakdown in insurer-customer relationships had eroded any sense of trust and loyalty.
Furthermore, insurance was often seen as a form of tax, or involuntary purchase, with only a minority feeling it gave them valuable 'peace of mind'. This was particularly true with compulsory motor insurance. Many respondents felt they were not getting anything back for their money.
Anti-fraud policies
There was a widely held view among those committing fraud that there was very little chance that they would be caught. In contrast, people who would not commit fraud had a strong belief that their claim would be checked.
All this confirms the importance of insurers continuing work on ways of improving detection, including systematic approaches such as the electronic data-sharing project scheduled this year.
"Robust anti-fraud policies demonstrate that insurers are taking their social responsibilities seriously. That can only improve the consumers' perception of the industry, " says Pandya.
Or could people be influenced to change their behaviour by being offered incentives, such as no-claims discounts? Will better customer service prove to be as important in the anti-fraud arena as it is in all other aspects of the business?
On this, Roy emphasises the point made by Hill. "There was evidence that some people committed fraud because they had a bad claims experience and were turned down, whether legitimately or not, and that insurance companies should learn from this to treat customers fairly and customers will be fair to you."
But will it make any difference given that the problem is now so inherently part of modern British society? Is there a desire on behalf of politicians to deal with this problem?
One step forward
"It is something that needs to be looked at in more detail. The (ABI's) data on motor fraud is one step forward," says Roy.
He adds that it seems clear that a mixture of deterrents and incentives is likely to be most effective in influencing people's behaviour positively.
'Tentatives' would be likely to be most motivated by positive deterrents, such as no-claims discounts, while the other groups may be affected more by negative deterrents, such as being refused insurance in the future, or receiving a fine.
Police priorities
The exceptions to this are the 'exploiters'; for this group the only deterrent appears to be the credible threat of a prison sentence.
"The issue of a threat of a custodial sentence needs to be looked at more. But the police place insurance fraud well down the pecking order of their priorities," concedes Roy.
Pandya adds: "The difficulty is in distinguishing dishonest claims from the honest without subjecting all to a degree of scrutiny. The challenge for the industry is to carry out this function without frustrating policyholders needlessly."
It seems that the issue will never be wiped out completely. But given the underlying reasons why so many people commit fraud it can only be properly tackled at a national government level. Is there a desire to do so?