No lockdown on insurance fraud

Posted: 20 October 2020

Despite a general UK-wide slowdown in activity during the Covid-19 lockdown, fraudsters have remained active and even exploited the pandemic for their own gain. Challenging economic circumstances have created fresh opportunities for criminals looking to commit fraud through a variety of methods, some of which are examined in this article.

While this type of fraud is by no means new, the pandemic has served to increase focus. This is because criminals, posing as insurance agents or brokers, will often lure customers with promises of cheaper policies, which are particularly attractive in times of financial hardship. In May, police arrested a man who had specifically targeted members of the NHS, offering discounts on bogus car insurance policies.1 

Illegal insurance intermediaries operate in one of two main ways: either genuine policies are purchased from legitimate insurance companies using falsified information and then doctored before being sold onto customers; or  criminals create fake policy documents using the branding of legitimate insurers. Typically, the policyholder will be charged a fee by the criminal on top of paying the ‘insurance premium’. Often, a victim of this fraud will only become aware of the scam when trying to make a claim, or when stopped by the police for driving without valid insurance.

 

Laptop on a desk
During lockdown, traffic on the UK’s roads was reported to have fallen by up to 73%, a figure comparable with levels seen in 1955.2 This resulted in fewer staged ‘cash for crash’ claims. However, with traffic now returning to pre-lockdown levels3, it’s possible we’ll begin to see an uptick in staged accidents. Further, safety measures such as social distancing could be used as an excuse for not involving the emergency services or for making it harder to identify the number of passengers in a vehicle. ‘Phantom passengers’ is one such ploy used by fraudsters where a driver exaggerates or invents the number of passengers in a vehicle.
In 2019, following an investigation by Allianz and DAC Beachcroft a driver was ordered to pay back £29,000 in costs after falsely submitting four personal injury claims.4

Claims farming, the practice of contacting prospective claimants and encouraging them to make a claim for financial gain, has come to the fore during the pandemic. Suspiciously, of 45 newly incorporated companies between February and March containing either ‘Covid’ or ‘Corona’ within their name, 11% had names which suggested they were operating as claims management companies (CMCs).5

One CMC’s incorporation was recorded as early as 13 March – the day after the UK risk level was increased from moderate to high. While reputable CMCs do exist (and are regulated by the Financial Conduct Authority or Solicitors’ Regulation Authority), others are less scrupulous and use methods such as cold calling, social media or Google adverts to target vulnerable people, or those who have contracted Covid-19. The latter of these methods operates on the basis of fraudsters paying search engine companies to appear at the top of listings in search results, often using a legitimate insurance firm’s branding to appear authentic. In other cases, the unsuspecting customer in a motor accident can be held liable for vehicle repair costs which they believed were being handled for free as part of their insurance service.

Although some fraudsters capitalised on the uncertainty caused by the Covid-19 pandemic, this does not signal an end to such activity as the UK eases itself out of lockdown (at time of writing). Indeed, it could even be the ‘calm before the storm’ with some fraud trends yet to peak. It is unlikely that organised fraud will ever disappear and insurers and brokers will need to remain alive to the latest tricks and manoeuvres employed by manipulative criminals. 
James Burge
Fraud Manager
Allianz Insurance plc

1 City of London Police: Man offers discount to NHS workers on fake car insurance. May 2020.

2 Guardian: UK road travel falls to 1955 levels asCovid-19 lockdown takes hold 3 April 2020.

3 Gov.uk: Transport use during the coronavirus (COVID-19) pandemic.

4 Allianz Press Release. MyNewsDesk. August 2019.

Kennedys. COVID-19 claims farming, risk level: high. 6 May 2020.

This article is part of the BIBA Broker Guide to the Insurance Fraud Landscape (October 2020).