Fraud is a huge problem for the insurance profession – can insurers do more to prevent it without impacting genuine claimants?
Outside the insurance profession, fraud is generally perceived to be a victimless crime. No one is hurt, and insurers are seen as having enough money to bear the cost. However, fraud adds around £1.3 billion to the cost of insurance claims every year , which is ultimately passed on to everyone else through higher insurance premiums. It is estimated that this adds £50 a year to each car insurance policy  – making all motorists victims.
In recent years the rising frequency and cost of personal injury claims in the UK, specifically for whiplash, have been blamed for rising car insurance prices. The UK has been called “the whiplash capital of Europe”, and some have even joked that we must have weaker necks than our continental neighbours, who see far fewer claims.
Unfortunately, soft tissue injuries are difficult to prove or disprove and some opportunists have taken advantage of this to make fraudulent or spurious claims. In fact, whole industries have been built around encouraging people to make a claim as the legal fees can be profitable enough to make it lucrative.
Some would argue that insurers must do more to fight fraud and should contest all suspicious claims, but that would impede compensation for legitimate victims. The insurance profession has a fine line to tread between challenging spurious claims and ensuring that genuine victims have access to justice and see their claims settled quickly.
One area where we see this tension is with pre-medical offers. Generally, a medical report would be needed to claim for compensation for injuries resulting following an accident. However, the reports can be expensive and delay settlement, adding hundreds or thousands of pounds to the overall cost of a claim. Some insurers make pre-medical offers to claimants, where they offer them a fixed amount of compensation without the need for a medical exam. This model assumes that most claimants are genuine and means that claims are settled more quickly and cheaply. On the one hand this is a better outcome for legitimate victims, but on the other it does little to discourage fraudulent claims.
In October last year, the Civil Liability Act was passed, and is due to be implemented in April 2020. It is hoped that this will help curb the number of spurious claims and bring down the cost of car insurance for all. It covers a number of areas, but specifically bans pre-medical offers. Instead, claimants will have to see an independent medical expert in order to make a claim. While this is bad news for fraudsters, there is concern that it could also be bad news for genuine victims as it puts another obstacle between them and their compensation.
Fraud is an age-old problem for insurers, with fraudsters developing new ways to steal all the time. As a profession we must continue to fight fraud while ensuring we look after genuine victims. It is a complex and ever-changing problem but goes to the very root of what the profession was established for.
 Latest Insurance Fraud report from the ABI: www.abi.org.uk/news/news-articles/
 See foreword: assets.publishing.service.gov.uk/government/