Fake insurance claims amount to £1.6 billion pound per year and increase premiums by £40 for each customer reveal industry experts.

A report by the Association of British Insurers (ABI) show that up to 400 members agreed payment of the claims because they were unable to prove they were fake.

Figures from the Insurance Fraud Bureau (IFB) calculated that fraudsters net up to £400 million a week with ‘crash for cash’ being a new technique for criminals.

‘Crash for cash’ involves a claim being made after the driver has purposefully caused an accident. The motorist may break suddenly while driving resulting in another car hitting his. The driver will then make a car accident claim for damage to his vehicle and may also attempt to claim for physical damage.

DCI John Chapman, Hertfordshire Constabulary, said: “This is the latest phase of an investigation by Hertfordshire Constabulary into staged accidents and fraudulent motor insurance claims.

“This is a developing crime type that members of the public may not be aware of and has the potential to net criminals large amounts of money.”

He added that the money is often laundered to fund other serious types of crime with the illegal claim sometimes netting £30,000. This can add up to 5% extra to premiums.

The IFB suggested ways to deal with a staged accident such as avoiding cars that swerve and brake quickly.

A spokesperson for IFB said: “If someone slams on their brakes and you go into them, don’t assume it’s your fault.”

They also recommend taking a photo of the accident if a collision occurs on a camera phone or disposable camera.

Successful, genuine, car accident claims lead to awards if the victim’s finances or quality of life have suffered following a motorists negligent driving. Victims can claim for ‘special damages’ and ‘general damages’.

Special damages would cover out of pocket expenses such as loss of earnings for which receipts are needed.

General damages include physical injuries and are established following a medical assessment. Claimants undergo examination and this tends to weed out any exaggerated or dishonest claims.

Nick Starling, director of general insurance and health at ABI, said: “The industry is fighting back. Insurance cheats are more likely to get caught than ever before. And cheats will pay a high price as future insurance and credit will be more expensive and harder to obtain.”

The IFB recognize that insurers prevent most fraud but said the growth in fraudulent claims needs a new approach.

The organisation aims to uncover fraud by comparing databases of claims and communicating with the police and insurers. It has also set up a ‘Cheatline’ so the public can call in with their suspicions.

IFB add that the Bureau shows the determination to expose the organised criminal gangs who often use insurance payouts to fund other crimes and put lives in danger.

John Beadle, Chairman of the IFB, said: “The Bureau is building powerful relationships with the police and law enforcement agencies. We are confident that the IFB will play an important part in protecting the honest policyholder.

“We will find, expose and pursue those involved in organised insurance fraud.”

Author's Bio: 

Linsey is an author of several articles pertaining to Car Insurance. She is known for her expertise on the subject and on other Business and Finance related articles.