The claim that fraud adds £50 to the average insurance premium is just “plain wrong”, legal campaigners have claimed.
The Association of British Insurers (ABI) has inflated the financial impact of fraud to lend weight to its lobbying efforts, campaign group Access to Justice (A2J) said in a statement.
A2J is campaigning against proposed changes to personal injury legal process that would potentially reduce instances of fraud.
The ABI has dismissed the accusations as the "bleatings of a self-interested sector".
"We argue that insurers are using ‘suspected' fraud figures to paint a bleaker picture of the extent of fraud than the reality, in order to press their case for a clamp down on personal injury claims," Andrew Twambley, spokesman for A2J, told Post.
"Nobody is denying that some insurance fraud exists, but there are better ways of reducing it than removing an injured person's right to redress if they are hurt through no fault of their own.
"We urge the government to disregard these spurious statistics, get some empirical data, and make the insurers take practical steps to combat fraud."
The ABI estimates that fraud adds, on average, an extra £50 to the annual insurance bill for every UK policyholder.
A2J commissioned Capital Economics to look at the statistics. It found that the ABI arrived at the £50 figure by putting together cases of proven fraud with suspected fraud. If proven fraud alone is considered, it only adds £4 per policy.
Twambley said that under ABI definitions, suspected fraud occurs where a claims handler challenges the applicant to clarify key information or provide additional information or documentation.
The claim is then badged fraudulent and continues to be defined as such if the claimant subsequently withdraws the application, fails to provide documents or ceases communication with the insurer.
"That's a win-win for the insurer because they aren't making a payout and can use unfairly swollen fraud statistics to lobby the government," he added.
The ABI denied it had misrepresented the statistics.
"The ABI is transparent about the methodology behind its fraud statistics, which are intended to provide an indication of the scale of a very serious problem which is pushing up the cost of car insurance for the majority of honest motorists," said Mark Allen, fraud and financial crime manager at the ABI.
"The issues raised by Access to Justice are just the bleatings of a self-interested sector which fears the prospect of losing a highly lucrative source of income.
"Insurers remain committed to tackling fraud at all levels, including the many frivolous and exaggerated personal injury claims which are so often fuelled by unscrupulous claims management companies. The Government is to be applauded for taking this issue so firmly in hand."
In his 2015 Autumn Statement, Chancellor George Osborne announced that people making personal injury claims worth up to £5,000 would have to use the small claims court and cannot recoup the cost of any legal advice.
In addition, they would no longer be able to get any cash settlement for pain and suffering caused, although they would be able to claim for physiotherapy and loss of earnings.
Insurers believe the changes will reduce instances of fraud.
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