Fraudulent insurance claims rise to over £110 million in 2013 – Aviva

More than GBP110m worth of fraudulent insurance claims were detected by UK insurance company Aviva during 2013, it revealed on Wednesday.

Aviva said its claims fraud detection data for 2013 shows that there was a 19% increase in insurance fraud, compared with 2012. The company reportedly discovers over 45 fraudulent claims each day, which are said to be worth more than a total of GBP300,000.

Insurance fraud varies from genuine claims to injuries that are exaggerated, or entirely fictitious claims and accidents. The fraud is often carried out by third parties, people who are not insured with Aviva but who are making a claim against an Aviva customer, for example injuries incurred as a result of an accident.

Motor injury fraud is said to be most common type of fraud in the UK and represents 54% of Aviva’s total detected claims fraud costs. Over half of these claims come from organised ‘cash for crash’ claims. One in seven personal injury claims are linked to suspected ‘cash for crash’ claims and the total annual cost to insurers for cash for crash is estimated at GBP392m annually, according to the Insurance Fraud Bureau (IFB). Aviva added that organised insurance fraudsters are often linked to wider gang-related criminal activities

Aviva has a team of 25 staff dedicated to detecting and prosecuting organised fraud, which is currently investigating 5,500 suspicious injury claims linked to known fraud rings, an increase of 20% since 2012. It has successfully prosecuted insurance fraudsters who made organised and bogus whiplash claims, who were given sentences of between 4 and 7 years. These organised frauds included more than 200 claims that had a potential value of over GBP5m. The company also shares information with other insurers, the IFB and the Insurance Fraud Enforcement Department (IFED) in order to bring about prosecutions.

Research conducted by Aviva shows that there is concern among consumers regarding the scale of insurance fraud, with 90% finding it unacceptable and 64% wanting insurance companies to take further measures to tackle fraud.

However, many people reportedly turn a blind eye to fraud. Aviva’s research showed that 66% of people would not report insurance fraud to the police if it was carried out by someone they knew. This was a 53% increase compared to a 2008 survey by Aviva. The impact of fraud appears to have been underestimated, as just 10% of consumers realise that everyone is affected by higher premiums, as well as more road accidents that are caused by fraudsters seeking injury compensation.

The research also revealed that 23% of people knew someone who had exaggerated a genuine claim, while 17% knew someone who had faked a whiplash injury in order to get compensation. More than one in eight people said they would consider exaggerating a claim, an increase of 35% when compared to Aviva’s survey 5 years ago.

Tom Gardiner, Head of Fraud at Aviva, commented:

“Our priority is to pay genuine claims quickly and fairly while offering a great service to our customers. Last year in the UK, for example, Aviva settled over 910,000 claims worth GBP2.65 billion. We identified fraud on less than 1.9% of claims we received.

“However, a combination of factors including the economic climate, social attitudes toward insurance fraud as a ‘victimless crime’, and a lack of effective deterrents are increasing the frequency of insurance fraud. The good news is that we are constantly improving our ability to prevent and detect fraud, helping to keep premiums down for innocent policyholders. The ABI estimates fraud adds GBP50 to the cost of insurance premiums.”

Co-operative Group suffers heavy losses of £2.5bn in 2013

The Co-operative Group, a British consumer cooperative that operates a range of retail businesses, announced its final results for the 52 weeks ended 4 January 2014 on Thursday, which showed losses of GBP2.5bn for 2013 when compared to losses of GBP529m for 2012, reportedly the worst results in the group’s 150-year history. Group operating loss was GBP148m for 2013, in comparison to profit of GBP142m for the previous year.

According to the group, the losses reflected the impact of its Bank recapitalisation. The Co-operative Bank has losses of GBP2.1bn, which included a trading loss of GBP1.44bn for the year to December, when the group gave control of Co-op Bank to US hedge funds. The group also took another charge of GBP625m when over 70% of the bank’s shares were handed to bond investors.

The results were also impacted by goodwill impairment of GBP226m, which arose on the acquisition of supermarket retailer Somerfield; however the Co-operative Group Food business achieved a robust second-half in like-for-like performance, with an overall 0.6% increase. Full year like-for-like sales in the Food division for the year fell by 0.2%, while LFL sales in core convenience chain rose by 1.6%. The effects of store disposals, a shorter accounting period and price reductions were reflected in lower revenues and underlying operating profits of GBP210m over the full year, which were down from GBP 297m the year before.

Group sales for 2013 were GBP10.5bn for 2013, compared to GBP11.0bn in 2012. Funeral sales were GBP370m, increased from GBP358m the year before, while Pharmacy sales dropped to GBP760m from GBP764min 2012. There was also a fall in General Insurance sales in 2013, which were GBP476m compared to GBP580m in 2012.

As part of the move to meet its obligations under the Bank recapitalisation plan, the trading group syndicate bank facilities have been renegotiated. The group has also reduced its net debt by GBP286m to GBP1.4bn as a result of the disposal and sale and leaseback of property assets and the sale of the remaining motor dealerships.

Capital expenditure was lower at GBP239m in 2013, compared to GBP410m in 2012, which reflected the necessity to provide capital for the Bank and to reduce debt.

Interim Group chief executive of The Co-operative Group, Richard Pennycook, stated: “2013 was a disastrous year for The Co-operative Group, the worst in our 150-year history. Today’s results demonstrate that but they also highlight fundamental failings in management and governance at the Group over many years. These results should serve as a wake-up call to anyone who doubts just how serious the challenges we face are.”

Chair of The Co-operative Group, Ursula Lidbetter, commented: “During 2013, it became apparent that our governance had fallen far short of the standards to which we aspire as a co-operative society. Now is the time to put that right through fundamental reform – we have to act with urgency if we are to lay the foundations for a stronger, healthier co-operative business in the future.”