Insurance Fraud

Publication Date01 March 1995
Date01 March 1995
AuthorMike Dixon
SubjectAccounting & finance
Insurance Fraud
Mike Dixon
Journal of Financial Crime Vol. 3 No. 2 Insurance
There is no doubt that the cost of fraud against
insurers is growing, recent estimates by the Asso-
ciation of British Insurers suggest that as much as
£2m is lost every day to fraudsters.1 Fraud occurs
in many different forms against insurers and the
varying scams are as legion as any other form of
financial crime. As with many other financial
crimes, there is evidence to suggest the fraudsters'
ventures are taking on an international flavour.
Life insurers have to contend with counterfeit or
bogus death certificates from certain third world
countries, while general insurers have to sift their
way through millions of pounds worth of false or
exaggerated travel insurance claims every year.
Travel and holiday insurance policies are consid-
ered to be the worst affected areas for fraudulent
Although the result of the majority of frauds is
financial hardship, in that the costs are passed on
to consumers in the form of raised premiums,
other fraud schemes result in physical harm. One
such case in the USA revealed a ring of fraudsters
who were breaking the legs of thoroughbred
horses in order to claim the insurance money.
Other examples of physical harm being caused are
to be found with some medical insurance frauds
where it is revealed that unnecessary operations
have been carried out. Some frauds may actually
feed upon a patient's greed or drug addiction.2
Insurance can,
be a cause of crime, ignor-
ing those occasions when the insurance companies
themselves are victims, there arc present-day
examples of the criminogenic nature of insurance,
such as the murder of a spouse for the insurance
money.3 The focus of the criminal act is upon the
unfortunate victim. Were it not for the insurance
policy, it could be argued that the criminal act
would never have taken place.
Although it is apparent that changes to protect
the insurance companies have always been readily
undertaken by the industry, other abuses in the
insurance market have led to legislation rather than
allowing for self-regulation. An example of
imposed legislation would be that concerning the
indemnifying of the lives of children at the end of
the last century. The change in the social structure
brought about by the industrial revolution was
evident in the proliferation of what were referred
to as 'burial clubs'. This early form of life insur-
which was payable on death to the next of
kin, had an iniquitous side, that being the loath-
some practice of parents killing their children for
the insurance money. Although this practice was
well known, the profitability of these policies
apparently was enough for the industry to con-
tinue issuing them. Self-regulation had little effect
and it was only after the public outcry brought
about by one particular heinous instance that the
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