Article date: 2 February 2009
Brokers and insurers need to be extra vigilant about commercial motor fraud as clients struggle with the impact of the recession, says Norwich Union.
Creating fake documentation, supplying false information about the level of risk in order to cut premiums and even setting fire to vehicles are just some of the deceptive activities used in an economic downturn, according to the insurer.
The warning comes as Norwich Union's underwriters are being briefed on a variety of potentially fraudulent activity to watch out for.
Mike Smith, commercial motor technical manager at Norwich Union, says: "The pressure of the credit crunch brings out extremes in human behaviour and insurance is one area that's vulnerable to this.
"For example, we had a policyholder with outstanding finance of £30k on a lorry. Due to financial difficulties, the person arranged for the vehicle to be stolen and then tried to claim for the loss. But investigations revealed that the theft was not genuine and the claim refused.
"Instances such as this, along with our experiences in previous recessions, enable us to highlight to brokers and our own underwriting staff some of the scams that a small minority of our policyholders resort to."
Fraudulent activities highlighted by Norwich Union's experience - and possible anti-fraud approaches - include:
- Use of fake NCD proofs: obtain and scrutinise these documents, contacting the alleged issuer if in doubt.
- Understating number of fleet vehicles: check vehicle numbers on unspecified risks against the Motor Insurance Database.
- Misrepresentation of driver ages and exposure to hazardous goods: look out for any changes in risk information, which make the risk appear more favourable and query any discrepancies.
- Increases in fronting: establish ownership of company vehicles and investigate young drivers. Consider if "part-time" employees are a possible front being used to cover children who are in full-time education or work elsewhere.
- Certificate fraud: the customer cancels the policy or defaults on the premium, but continues using vehicles. Request return of certificate before refunding premium where possible.
Suspect theft and fire claims (especially among luxury cars) where customers can no longer fund finance arrangements: investigate suspect claims thoroughly.
Check drivers' licences (original not copies) regularly as there is a temptation for new and existing drivers to cover up convictions: for example, the driver of the 2007 Heathrow coach crash had been caught speeding five times. Employers who do not check licences could be invalidating their insurance, exposing their business to lack of customer confidence and face prosecution under Corporate Manslaughter legislation.
Increases in contrived accidents or exaggerated claims from third parties: ensure drivers record all details of other drivers, vehicle damage and take discreet photographic evidence if possible. Involve the police if there is any suspicion of a "staged accident". Importantly encourage customers to report claims immediately both to minimise cost of third party claims and help counter fraud.
For further information, please contact:
Jon Clements at Staniforth on 0161 919 8022/07989 414486 or Adam Cracknell at Norwich Union on 01603 684 916/ 07800 699517.
Notes to editors:
This press release should not be relied upon as Legal advice.
Norwich Union is the UK's largest general insurer with a market share of around 15%, with a focus on insurance for individuals and small businesses.
It is a leading provider of life, pensions and investment products and one of the largest financial adviser (FA) providers. FAs provide over 70% of the company's long-term savings business in the UK.
In the summer of 2009 Norwich Union will change its name to Aviva. Aviva is the world's fifth largest insurance group and operates in 27 countries. Aviva is to become the customer brand worldwide, thus enabling the company to compete even more effectively on a global scale for the benefit of customers, staff, business partners and shareholders.
Norwich Union's news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media