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UK carriers hit by record insurance fraud costs

The cost of fraudulent insurance claims in the UK reached a record high of £1.3bn last year, up 18 percent from 2012, according to figures published last week (30 May) by the Association of British Insurers (ABI).

Overall, the ABI found that insurers detected 118,500 bogus or exaggerated insurance claims in 2013.

Fraudulent motor claims were the most expensive and frequent, with the number of claims rising by 34 percent from 2012 to 59,900, while the claims value increased by 32 percent to £811mn ($1.35bn).

So-called "crash for cash" insurance scams, in which claimants stage a car crash, cost the industry at least £120mn ($200.4mn) last year, the ABI said.

Currently, the Insurance Fraud Bureau - created in 2006 to tackle organised cross-industry motor insurance fraud - is aiding the investigation of 110 suspected crash-for-cash claims.

Examples of exposed insurance cheats include a scam staged by 60 people involving claims of over £514,000 from 25 vehicle crashes, and a vet jailed for two years for inventing nearly £200,000 in veterinary claims for the treatment of non-existent pets.

However, the number of property insurance scams fell by 38 percent compared to 2012 figures, with 35,000 fraudulent claims worth a total of £137mn.

Aidan Kerr, the ABI's assistant director and head of fraud, commented: "Insurance fraud is not a victimless crime, which is why the industry invests £200mn a year in fraud detection, including funding the Insurance Fraud Enforcement Department and developing the Insurance Fraud Register, a central database of known insurance cheats."

Kerr added that the penalties for offenders had become increasingly severe and now included a custodial sentence and a criminal record, as well as difficulties accessing financial products in future.

Earlier this year, UK personal lines insurer Aviva said it identified £110mn ($184mn) worth of insurance fraud last year, an increase of 19 percent compared to 2012.

Aviva found that the main perpetrators were organised gangs, as well as third parties that exaggerated or invented claims against Aviva customers.

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