Counter fraud specialists at DAC Beachcroft are predicting an explosion in the number and value of fraudulent claims for vehicle damage following a motor accident, as fraudsters shift their focus away from exaggerated whiplash injuries to new areas of non-personal injury fraud.
Speaking at the firm's recent Counter Fraud conference, the first event in its new Future Series programme, Helen Mason, DAC Beachcroft partner and head of credit hire fraud, urged insurers to broaden their fraud strategies and action plans to cover this new type of fraud. Ms Mason said, “We anticipate that fraudulent accident damage claims are going to explode in size and frequency, as the reforms introduced by the Civil Liability Act start to bite and the personal injury element in a claim becomes less lucrative for fraudsters.” Ms Mason explained, “There have always been claimants who have deliberately damaged their vehicles further so as to inflate their claim, but now we're seeing claims for longer repair times so requiring extended credit hire periods, invoices for more expensive repairs, wrongly calculated VAT charges and higher disbursement costs. All these additional layers of cost are pushing up the total loss claim and, more importantly, are creating potentially new avenues for the fraudster.”
Ms Mason urged insurers “ to work closely with their engineers and supply networks to identify accident damage fraud," she said, "and they will need to ensure they have teams trained to spot the warning signs.” A sharp rise in the number of litigants-in-person bringing claims was also predicted, particularly in relation to casualty fraud. With the lifecycle for casualty fraud claims brought by litigants-in-person taking over 60% longer to conclude compared with other claims, and despite DAC Beachcroft's fraud team achieving a 66% repudiation rate, delegates were warned that legal costs were likely to be higher. This is because law firms would be expected to help the litigant-in-person to understand the procedural rules.
In her closing remarks, Catherine Burt, DAC Beachcroft's head of counter fraud, predicted that, although technology and artificial intelligence will play a significant role in identifying fraud, the human element will continue to be key. “In our experience, the human element in fraud detection remains very important,” she noted. "It is crucial to verify information and check for false positives, and some large fraud rings have only been detected as a result of the gut instinct of one handler or analyst who spotted an anomaly and decided to investigate.” She also encouraged insurers to keep fraud on the agenda and not to let the reforms be an excuse to downgrade fraud, “We need to keep defending claims, pursuing sanctions and publicising the results, if we are to deter the fraudster.”