James Daley

By James Daley

If the insurance industry is to believed, a significant swathe of the UK population is quite comfortable when it comes to telling lies. Claims for burglary or fire at home are, so they tell us, quite often inflated by the customer - with people finding it hard to resist the temptation to claim for a few extra things that never actually disappeared, or weren't damaged. It's not hard to see how people end up getting drawn in.

You come home to find your house has been ransacked, and discover that the burglars neglected to take your TV. It's 10 years old, and you've been thinking about upgrading anyway. So you take it down the tip, and tell your insurer that it was taken along with the rest of your stuff. What do they care? They make millions of pounds don't they? And you've paid your premiums for years, and never got anything back until now. Right?

While this kind of behaviour is rightly illegal - and can't be condoned - the insurance industry needs to think carefully about how it tackles this kind of fraud. We're not talking here about organised gangs of criminals staging crashes for cash. We're talking about people who are ordinarily law abiding, but decide to step over the line when it comes to dealing with their insurer.

Sledgehammers and nuts

Some of the industry believes the way forward is to hunt out cases such as these and prosecute - making examples of casual criminals and sending a message to anyone else who considers this kind of opportunistic fraud.

Personally, I think that's quite the wrong approach.

To my mind, the reportedly high levels of opportunistic false claims spring directly from the contempt in which many people hold insurers. Many people feel that insurers are there to take advantage of them - quick to take their money, but willing to fight as hard as they can to ensure they don't pay out any claims.

My view of the industry is not quite as cynical - I know that many companies try to be fair - but it's not hard to see why trust in insurers is low. If you're involved in an accident that wasn't your fault, some insurers will put up your car insurance premium nevertheless - as they say that the statistics prove you're more likely to be involved in future accidents. Whether that's true or not, it doesn't seem fair, and adds to the deficit of trust that lies between insurers and their customers. Other insurers will take your no claims bonus away when you're crashed into by someone who doesn't have insurance, forcing you to claim on your own policy.

And while there is plenty of good practice in the world of insurance, there are still a number of companies who do make it too hard to claim - and do end rejecting valid claims.

Making examples of casual insurance fraud is unlikely to crack the problem. More likely, it will harden attitudes towards the industry.

Working behind the scenes

There's plenty the insurers can do to tackle this kind of fraud behind the scenes - sharing data with other insurers, and analysing claims carefully once they come in the door. But at the point of claim, insurers need to treat all customers without suspicion - making the claims process as simple and quick as possible, rather than treating very claimant as a potential fraudster.

It's worth remembering that insurers are the ones that choose not to have a personal relationship with their customer. It's cheaper to be faceless, and sell high volumes of policies through comparison sites.

If I was starting a home insurer, I'd visit every customer's house and get to know them personally. Companies like NFU do in fact do this in some cases, and these personal relationships stop people feeling like insurance fraud is a faceless victimless crime.

So it's right that the industry finds ways to clamp down on fraud, but it mustn't lose sight of the fact that the most effective way will be to rebuild trust with its customers. And there's no better way to do that than to offer people a fantastic claims service, which leaves them telling all their friends.