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Money Times - July 10, 2018

Posted by Jill Kerby on July 10 2018 @ 09:00

GARDA INSURANCE FRAUD UNIT WELCOME BUT WON’T BRING PREMIUMS DOWN RIGHT AWAY

Being the victim of someone else’s fraudulent insurance claim is not very pleasant.

Less than a year after I learned how to drive, I unfortunately bumped into the side of another car as we were both moving into (me) and off (him) a wide yellow crossbox one wet, late December afternoon.

Since we were both only inching along at less than 5km an hour, my left – undamaged - front bumper left a small dent in his left back passenger door.  The worse damage we inflicted was further snarling up rush hour traffic until we could both pull over to the side of the road.

I was devastated. We exchanged insurance details; I was clearly in the wrong. But the damage was tiny and if I had known, I would have offered to pay the damage from my own pocket rather than involve my insurance company. Nor did I call the Gardai, or look for witnesses, so minor was the altercation. I did notice however that the other driver’s car was old and rather banged up, with lots of little dents and scratches. I was mistakenly consoled by this.

I filled out the insurance forms but was outraged when I was informed that the claim – for over two thousand pounds - had been approved, seemingly without any second thought by my insurer.  Despite reminding the claims official of my description of the accident, he blithely replied that “small claim” were pretty much just rubber-stamped and disputes weren’t worth pursuing.

That was 34 years ago.

Who was at fault here (aside from me?)  The other driver for hugely exaggerating the damage to his already battered old car, or the insurance company for blithely paying up because the alleged cost of the damage was, in their view, inconsequential?

Last week, the Irish general insurance industry (you and me, again) agreed to fund a new, specialist Garda unit that will cost €1 million a year to investigate insurance fraud. 

The unit will be focussing on the big staged motor accidents (You-Tube is full of recordings) orchestrated by both individual criminals and organised crime gangs that result in exorbitant personal injury claims.

 It isn’t just motor fraud that is contributing to an estimated extra €50 cost per every insurance premium in Ireland:  small businesses are targetted too by customers (and employees) claiming they’ve injured themselves on the premises or at their workplace, usually by falling on wet or greasy surfaces they arranged themselves, by ‘accidentally’ falling down stairs (especially in pubs, nightclubs and restaurants) or by burning or cutting themselves, etc. 

Insurance fraud costs an estimated €200 million a year but the new 12 person insurance fraud unit will be kept so busy that they are unlikely to end up investigating very many of exaggerated claims that ordinary homeowners allegedly make when their home suffers damage or they experience a break-in.  The only thing these people might worry about is a guilty conscience. 

(The addition of no-claims bonuses to household policies – like the kind that apply to motor policies would help reduce exaggerated claims, a broker told me: “Even a small claim is likely to result in a huge premium jump, so people think, ‘I might as well gild the lily’.”)

One industry expert, Jonathan Hehir who operates a number of general on-line insurance brokers including Insuremyshop.ie and Insuremyhouse.ie said the more fraudulent claims, the higher premiums will increase.

“It’s encouraging to see the industry work together to combat this growing epidemic and if the UK system is emulated, as is the intention, then I would be confident that it would have an almost immediate effect of reducing the instances of claims – which will then have the knock-on effect of reducing premiums.”

This isn’t the first effort to reduce dodgy claims. In 2003, at the peak of the Celtic Tiger, Insurance Confidential, an initiative by Insurance Ireland, invited people to report suspected fraud to them.  Its motto was ‘Insurance Fraud is not a victimless crime’. It claims “thanks to the effort of the public it has helped prevent thousands of fraudulent claims to date.”

That may be so, but the situation is worse 15 years later, says Jonathan Hehir: “The scale and resources are simply not enough to deal with the level of fraud the industry now has to contend with, and the involvement of the Gardai on a larger scale is absolutely necessary,” He adds that his staff are all trained to recognise signs of fraud.

The cost of motor insurance had gone up by about 70% over the last 5-6 years. Premiums have fallen back somewhat in the last year but there is no similar evidence for home and shop insurance. Adding another €1 million a year to the industry’s costs – while very necessary – doesn’t augur well for a quick fall in customer premiums. 

This is just another ‘don’t hold your breath’ event.

 

(The new TAB Guide to Money Pensions & Tax 2018 is now out. See www.tab.ie for ebook edition.)  

 

 

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