With the same level of accuracy with which night follows day, a recessionary environment begets elevated levels of insurance fraud. And with a cost-of-living crisis raging while inflation lingers at around the 10.1% mark and calamitous headlines warn of heating bills going through the roof, early reports are already earmarking insurance fraud as a major concern for the industry.
In July 2022, Zurich UK saw a 25% increase in fraudulent property claims, fuelled by mounting cost-of-living pressures. The insurer noted that high-value jewellery, mobile phones and TVs were among the most common items that fraudsters have claimed to be lost, stolen, or damaged – with the average claims amounting to about £8,800.
Read more: ABI reveals fraudulent claims figures
Meanwhile, the Insurance Fraud Bureau (IFB) has unveiled a cost-of-living linked anti-fraud campaign, noting it has seen a 17% increase in people being added to the national Insurance Fraud Register (IFR). Thought leadership published by insurance law firm Kennedys highlighted that there are four key drivers behind the link between economic pressures and fraudulent behaviour:
- Incentive/pressure – where need or want drive fraud
- Opportunity – where fraud is possible given the system/process/context
- Rationalisation – where fraudulent behaviour is deemed either worth the risk or justified
- Capacity – where the ability to recognise and the capability to execute fraud come together
Across Insurance Business UK, several notable examples of insurance fraud being committed have been spotlighted while a recently published guide highlighted the most common types of insurance fraud in the UK.
But there’s a fraternal twin to insurance fraud and its deep-rooted relationship to the economy which can often slip under the radar in conversations about mitigating the impacts of a recessionary environment on insureds and insurance businesses alike. Recession-linked crime is a consideration that has puzzled researchers and statisticians for multiple decades – with each dip in the UK’s GDP yielding new insight into whether crime increases or decreases during times of economic turmoil.
News from the frontlines of insurance businesses reveals that this time around at least, the latter looks more likely. A report from NFU Mutual emphasised a sharp rise in rural crime as the cost-of-living crisis hits the countryside. Rural crime saw a drop in 2020 and 2021, the mutual insurer said, but it has since risen over 40% in Q1 2022 – with farm vehicles, including quad bike and trailer thefts, continuing to plague the countryside
NFU Mutual noted that the data recorded from H1 2022, compared with that of H1 2021, reveals that the frequency and cost of fuel theft claims have more than doubled in that period. In a new poll of the rural community by NFU Mutual, almost half of respondents (49%) said that fuel theft was now their greatest crime concern.
Commenting on the findings, Rebecca Davidson, rural affairs specialist at NFU Mutual, said: “With prices of essential farm equipment such as tractors and quads rising fast and the cost of diesel soaring over the past year, there’s little doubt that criminals will be trying to steal from farms.
“We also know that essentials of rural living like heating oil tanks will only become more attractive to thieves as costs rise. A recent poll by NFU Mutual reveals that 89% of respondents believe inflation will lead to an increase in rural crime.”
Recession-linked crime, and insurance fraud as a subsect of that, represents a challenge to insurance brokers, requiring additional insight, support and thought leadership. As with so many challenges in insurance, however, it also presents an opportunity for brokers to highlight the immutable advantages that their services can offer insureds.
Brokers need to be in place to provide effective thought leadership aimed at helping clients – whether across the fine art & specie market, the high-net-worth market, the agricultural insurance piece or even just day-to-day personal lines insurance offerings – understand their exposures and mitigate the risks they face.
And they need to tap into every available resource from their insurance partners, across the entire value chain, to ensure that applicable support, advice and measures consistently find their way into the right hands. From encouraging clients to invest in effective security measures, to tapping into police resources, to reiterating best practices, insurance brokers have a keen role to play in protecting businesses and individuals as they weather the storm of the latest recessionary environment.