Claims inflation: Fraud

Today’s economic and legal climate has created a perfect breeding ground for fraudulent claims. Whenever there’s a challenging economic environment, there’s inevitably a spike in the cost of fraud, as we saw back in 2008 when there was a rise of 17% in the incidence of fraudulent claims (1).

As we emerge from the Covid-19 pandemic into a cost-of-living-crisis and with inflation biting for us all, it’s to be expected that more people are tempted to make false or exaggerated claims or are more frequently being persuaded into doing so by claims management companies and other lead generators. In today’s more connected world, the issue of data theft is very prevalent, making it easier for unscrupulous actors to target vulnerable individuals they believe can be encouraged to make claims, for instance due to their previous claims history.

Added to which, major changes to small claims legislation in the motor sector and the 2021 reform of the claims process for whiplash in Road Traffic Accidents (RTAs) (that imposed a fixed tariff on compensation) are having a major impact on how claims-related organisations go about their business. The knock-on effect is that some claims management companies are being forced to replace lost or unprofitable revenue streams by targeting other areas of the market, engaging with both genuine and potentially also with non-genuine referral sources. Moreover, claims management companies’ focus on ‘vulnerable’ claimants is intensifying.