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» Prevention PREVENTION IS BETTER THAN DETECTION Fraud can no longer be ignored by the motor insurance industry. The Association of British Insurers (ABI) estimates that it is currently costing £1billion a year – and that is just the detectable fraud. 8% of motor claims are fraudulent and with one in ten drivers being prepared to lie to an insurance company to keep their premiums down (RAC Financial Services) this figure is set to rise. The bulk of this fraud is detected at claims stage. Insurers spend ₤millions in an effort to reduce fraudulent claims by way of voice stress analysis, lie detectors etc, however, insurers agree that this is generally too late to prevent fraud. (Allianz Cornhill Shuns Lie Detectors - Insurance Times 3/11/2005)
In recent test cases the insurance ombudsman highlighted that the insurance industry itself must take responsibility for verifying their risk before underwriting it. An obvious loop-hole is that motor insurers provide cover WITHOUT physically seeing their risk at the underwriting stage. motorcheck™ suggests that the only effective way of dealing with motor fraud is to inspect the vehicle at policy inception and hence PREVENT fraudulent claims before they occur. Recent vehicle inspections, with new business policies of leading UK insurers, show that only 34% of all cars matched the details of the policy application and were hence correctly underwritten and priced. Some 26% of all cars had obvious pre-existing damage (glass or bodywork) and 2% of all cars were already sold, stolen or written off. 9% of all cars had undeclared modifications resulting in an, on average, 14% increase in the premium post vehicle inspection (Source: Admiral Insurance). In total, 18% of all policy holders avoid a physical vehicle inspection and a subsequent Royal & Sun Alliance study found that those policies had a 44% higher claims rate than the average. A policyholder survey carried out by Norwich Union shows that the majority of their policyholders viewed them more positively as a result of the vehicle inspection. These numbers are testimony to the effectiveness of a vehicle inspection service at underwriting. motorcheck™ estimates the benefits to be some £5 for every £1 invested in the service. (Calculated using market average claims frequencies and costs.) |
COMMENT
 "The insurance industry realises the obvious benefits in fraud prevention as opposed to fraud detection. Insurance companies simply have nothing to lose and everything to gain from physically seeing their risk at inception." Bernd Veening - Consultant
The King's Observatory Old Deer Park Richmond TW9 2AZ Tel +44 (0) 20 8334 9610 Fax +44 (0) 20 8334 9532 |
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