Insurance industry warns of fraud

28 July 2011 Last updated at 04:13 GMT The insurance industry says bogus claims are costing ?2bn a year Bogus insurance claims in the UK rose almost 10% in 2010 from 2009 to an average ?18m every week, according to the Association of British Insurers.

Investigators uncovered 133,000 fraudulent claims, with about 66,000 of these related to home insurance.

Motor fraud was the next most common, with 40,000 cases uncovered.

"Fraudsters continually look for new ways to con insurers, so we are upping our game," said Glen Marr director of the Insurance Fraud Bureau.

Examples uncovered included:

A claim for back injuries while working in a nightclub was rejected when Facebook images showed the claimant performing gymnastics;A claim for face injuries said to have resulted from a falling toilet roll holder in a fast food outlet was rejected when it was shown that the equipment would have had to have fallen upwards to cause the injury;A claim by a woman for the loss of a ?2,000 watch after a night out was rejected when the photograph she provided of her allegedly wearing the watch turned out to be that of a friend;A claim for injury said to be caused by falling over a wall was rejected when it was proved that there was no wall at the scene of the alleged incident.

The ABI estimates that insurance fraud costs ?2bn a year, adding, on average, an extra ?44 a year to the bill for every UK policyholder.

Crackdown

Over the last five years both the number and overall value of such frauds detected had risen by over 100%, the ABI said.

Nick Starling, the ABI's director of general insurance and health, said that tougher surveillance measures were being introduced to tackle bogus claims.

"Early next year we will be setting up a national Insurance Fraud Register, which will contain details of all known insurance cheats."

He also highlighted the launch of a national police unit to investigate such fraud.

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National Insurance cards to end

27 June 2011 Last updated at 11:45 GMT People receive their National Insurance numbercard at the time of their 16th birthday National Insurance numbercards will be phased out from July, with people receiving a letter instead, the tax authority has confirmed.

Replacement cards have already been axed, but from July new cards will be phased out, HM Revenue and Customs (HMRC) said.

The move is expected to save the government ?820,000 a year.

The idea came from a Treasury challenge to the public and civil servants to find ways to cut the deficit.

From July, the card, which carries people's unique National Insurance number, will no longer be sent to adults who require the number for the first time.

People reaching the age of 16 will still be sent a card, but these will also be phased out - with letters sent instead - later in the year.

"If you are an employer you will need to bear this in mind when taking on a new employee," a spokesman for HMRC said.

"You do not need to have a National Insurance numbercard - it is your number that is important."

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New insurance regulation unveiled

20 June 2011 Last updated at 18:54 GMT Policyholders will be more important than shareholders under the new regulatory regime The protection of insurance policyholders will be a priority for the new Prudential Regulation Authority (PRA), it has been announced.

The PRA will take over the supervision of financial institutions from the Financial Services Authority (FSA) by the end of 2012.

The Bank of England and the FSA say under the new regime, insurers will still be allowed to fail if insolvent.

But the PRA will aim be to minimise the impact on the financial system.

"The PRA's role will be to ensure there is a reasonably high probability that an insurer is able to meet claims from, and material obligations to, policyholders as they fall due," the Bank and the FSA said.

"And to make sure that where an insurer is unable to meet such claims and obligations, the adverse consequences for policyholders are minimised by ensuring that the insurer fails in an orderly manner."

The new authority will regulate 1,094 insurers in the UK as well as the country's banks.

New regime

The PRA will be report to the new Financial Policy Committee of the Bank of England, whose job will be to ensure the stability of the UK's financial system.

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The PRA will expect the firms it regulates not to engage in 'creative' compliance with its rules ”

End Quote FSA and Bank of England Last month Hector Sants, the incoming head of the PRA and the current boss of the FSA, warned that banks in the UK would be much more strictly regulated than they had been before.

Insurers in the UK have already been under the close scrutiny of regulators for most of the past decade and were largely undamaged by the financial and banking crisis of 2007-08.

All firms under the new regime will be subjected to the same "base line" level of supervision and regulation to ensure they have enough money and sufficient reserves to meet claims and pay out on investment policies.

"While insurers are not systemic in the same way as banks, their behaviour or failure nevertheless has the potential to pose risk to the stability of the financial system," the Bank and the FSA said.

"When insurance is combined with banking in a single group (as is the case for many of the largest UK banks) that may give rise to system-wide risk if the failure of the insurer threatens the financial condition of the bank," the regulators added.

Powers

The PRA will not wait for disaster to strike before acting.

It says it will use its powers to interfere directly in the management of a firm if it thinks this is needed to stop an insurer's finances deteriorating and putting the business at risk.

As well as directing management action, the PRA will be able to restrict a firm's ability to operate, impose fines or even go to court to prosecute a firm or individual who refuses to stop acting in a risky manner.

The regulators also said they would not tolerate attempts by insurers to pull the wool over their eyes.

"The PRA will expect the firms it regulates not to engage in 'creative' compliance with its rules and policies and not to engage in regulatory arbitrage designed to mask the riskiness of their activities or financial exposures," the Bank and FSA said.

The PRA will pay most attention to the biggest insurers, whose failure would pose the greatest threat of disrupting the UK financial system, to try to make sure they do not take disastrous risks.

Among them are Aviva, Legal & General, Prudential, Old Mutual, Standard Life, Lloyds banking group, as well as Lloyds of London.

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