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COVID-19 UK: Fraud - Fraudulent personal injuries in a time of financial crisis

  • Market Insight 04 May 2020 04 May 2020
  • UK & Europe

  • Insurance & Reinsurance

Damian Rourke predicts the impact of COVID-19 on fraud insurance claims.

COVID-19 UK: Fraud - Fraudulent personal injuries in a time of financial crisis

It is an unfortunate reality that many across the country will find themselves in financial difficulty resulting from the measures taken to prevent the spread of COVID-19. In a time such as this, some people may see no other option and look to relieve some of these difficulties by making a fraudulent insurance claim.

The most recent comparable event causing an increase in fraudulent activity was the recession caused by the financial crisis at the tail end of the 2000s. Reports from that time indicate increases in motor and other insurance fraud as a result of the financial climate.

In these uncertain times, where might insurers see increases in claims fraud from private individuals; likely after the pandemic subsides but financial concerns remain?

We previously identified a risk heading into 2020 that the whiplash reforms would drive personal injury fraud into other casualty lines such as employers and public liability. However, any push is unlikely to occur during the ongoing social distancing measures with access to public spaces limited, and many employers closed or allowing work from home. The months after the pandemic are likely to present the opportunity to test insurers procedures in other casualty lines, as any return to normality will likely increase claims numbers and place pressure on insurers to manage them.

Similarly, whilst the measures available to insurers for rooting out motor fraud have become ever more complex and efficient, this should not mean that insurers should rest on their laurels in this fight. The ongoing whiplash reforms have recently been delayed from August 2020 to an expected implementation date of April 2021. We continue to expect to see a surge in registered claims, whether genuine or not, immediately before the reforms are finally confirmed as in place, in order to take advantage of the more generous damages awards for whiplash injuries.

Fraud will also occur through the dishonest exaggeration of genuine injuries. Intelligence gathering by insurers will remain a crucial tool in rooting out this behaviour, and ensuring that dishonest exaggeration of claims is appropriately punished. Our Project Martello initiative has led the market in handling these claims.

The last recession also saw increased attempts to write-off vehicles. The increase uptake in the use of personal contract purchase contract to finance vehicles will leave many unable to pay their monthly payments. In addition, those households which have two or more vehicles, one of which is no longer needed, may attempt to obtain funds from the write-off of one of those vehicles.

In summary, we expect that opportunistic fraud and/or exaggeration of genuine claims in the months following the alleviation of the crisis will increase. Whilst insurers will be expected to deal with claims sensitively and quickly, particularly genuine claims for parties in financial difficulty, this understanding will need to be balanced against the need to continue to root out fraudulent and exaggerated claims.

Click below to read our predictions for the likely impact of the pandemic on UK personal injury claims.

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