The rates at which insurers are now having to deal with fraudulent claims has risen to £1.3mn a day and with more than £25mn a year being invested in conducting fraud investigation, the insurance industry can look to face a number of costs in future years.

There are a variety of forms which fraud takes, including orchestrated arson attacks, pretending to have a disability as well as staged motor accidents. The insurance industry is having to take on new strategies in order to tackle additional trends emerging, such as internet and mortgage fraud. In a period where nothing is certain and risk is involved in every action and transaction, suspicion is heightened and industry professionals need to maintain an increased awareness to both their customers and business relations.

Fraudulent insurance claims cost the industry around £1.6bn a year and it is not only the insurers that are affected, honest customers can find themselves landed with an additional premium cost of £40 a year added on to their policy. One wonders if the rise in fraudulent insurance claims could be directly linked to the increased financial pressures faced by consumers in the weakening western economy. With a large number of the claims relating to fraud in the housing market and mortgage scams it doesn’t seem unlikely that we are observing a cause and effect situation. The housing market is a prime candidate for the credit crunch to cause momentous damage, which is clear from past periods of recession in which rents go up and house prices fall and decent mortgages become as easy to find as a needle in a haystack.

Of course, we are all aware of the coverage of the economic slowdown and fully expect to see a repeat of events in the US; therefore it is no surprise that people are acting out of desperation. People are warned against panic-buying despite the fact that costs are rising by the day and necessary resources such as food and fuel are the areas that are biggest hit by this change in economy. In this way, those who are committing mortgage fraud in particular, looking for their own way of sidestepping the credit crunch, are in some ways of the same strain as those who run out to the nearest petrol station and fill up their tank to the maximum upon hearing that resources are low, despite the fact that people should not react to this by doing exactly that.

However, understandable or not, fraud investigation companies must work together with the insurance industry to prevent and minimise fraudulent pay-outs, which are made every year affecting both businesses and consumers. Intelligent electronic mapping tools, a recent advancement in technology, is one tool that could be utilised to identify fraudulent claims early on through the assessment and analysis of trends and patterns relating to insurance claims and consumer activity. Moreover, how effective, not to mention feasible, would it be to bring in a prevention strategy such as a Global Fraud Database, which works by linking up the entire industry via network so as to collaborate all data that is gathered, thereby having a larger base of information and trend statistics to work from. Essentially, until these questions are answered, it is near impossible to determine how the insurance industry will deal with the issue of fraud and those that are responsible for it.