In an era of Instagram brows and duck lip selfies, the beauty industry is thriving. While most customers visit their hairdresser, nail bar or tanning salon to look smoking hot, others see a beauty treatment as a route to a windfall, via a fraudulent insurance claim
Insurance fraud at a beauty salon? Sounds bizarre? Actually, SME insurers ignore this trend at their peril. Fraud does tend to be commonly associated with areas like crash for cash, but some red warning flags are waving in the beauty sector, including more claimant solicitors trawling for business.
Of course, if a beauty procedure is carried out negligently, then victims should be compensated. But it seems not all claims are genuine. It may be too early to tell if there is an organised element, or if it is opportunism, but certainly more claims are meriting investigation.
DAC Beachcroft noted rising levels of fraud: partner Claire Laver has been dealing with a spike connected to beauty salons, hairdressers, spas and leisure centres. Some are slips and trips; others are connected to waxing, eyelash tinting, eyebrow tattooing and hair extensions.
Although the claimant may well have a genuine problem, the procedure they are claiming as the cause may not always be at fault.
For instance, someone who had burnt their scalp at home with bleach could blame a salon for using a tint dye. Or someone wearing extensions to mask hair loss might claim extensions have caused the problem.
Laver believes SME insurers should keep an eye on this area. Looking at recent claims presented for investigation, 42% turned out to be fabricated.
“Suspicious claims involving allegations against beauticians are coming from across the UK. Unlike crash for cash, there are no particular hotspots,” she says.
Further, pop-up salons are a concern as, when they cease trading, staff can become difficult to track down.
A range of big-name insurers were contacted to comment on fraudulent beauty claims. Some declined to reply, while others said they hadn’t seen any rise.
Nicola Smith, a solicitor at Kennedys, believes there isn’t a specific issue with this industry. “More people are having beauty treatments than ever before, like a combined effect of the selfie culture and availability. It’s rare to see anyone on TV these days who hasn’t had some kind of treatment, from more common treatments such as having your hair coloured or having nail extensions to lip fillers, eyelash extensions, semi-permanent makeup and laser hair removal.
“However, despite the increase in availability and demand for beauty treatments, I haven’t found there is a similar rise in the number of beauty claims, genuine or otherwise. There has been an increase in casualty (or non road traffic accidents) claims with fraud concerns but I wouldn’t say the beauty industry is being targeted. For now, at least.”
Putting a lid on beauty fraud
Beauty salons and hairdressers can make fundamental errors when it comes to protecting themselves.
Claire Laver, partner at DAC Beachcroft, says salons should have a clear patch test protocol, involving a simple form, signed by the customer. She adds better tills, where receipts show what treatment was done, by whom and when, would also help. And salon staff should record incidents in an accident book and see if there are witnesses.
Nicola Smith, a solicitor at Kennedys, adds: “Good record keeping is essential to any business and the beauty industry is no exception to this. Increasingly businesses are relying on electronic booking and attendance systems, which should make it easier to retain relevant information for longer periods of time. I would strongly advocate keeping records of appointments, treatments received, patch tests and consent and medical questionnaires for at least three years.
“It’s also beneficial to have records to demonstrate staff were appropriately trained, correct treatment procedure was followed and any other hygiene steps were taken, such as sterilising equipment.”
Finally, defendant lawyers can also work with claims managers to ensure initial checks are handled competently in-house, which will reduce fraud investigation costs. This means a sound question set to establish what happened and when, if the claimant was known to the business and if they complained at the time, obtaining evidence and seeing if the injury claimed for correlates to what was said.
Rob Wadey, head of casualty at Barbican Protect, which specialises in gyms and spas, says genuine claims can include slips and trips when getting out of whirlpools, allergic reactions to facial creams and massage oils, and burns from using sunbeds. He explains the higher end of the market, which his company focuses on, “can demonstrate proven risk management techniques. These operations have achieved a consistent claims performance over the last few years with no real spikes.”
Wadey emphasises it tends to be at “the lower end of the market where you see higher claims frequency, for example in unmanned discount gyms and pop-up beauty parlours.”
“There has been an increase in insurance fraud and we view this as a wider societal issue that spans all sectors. Individuals are now far more aware of the potential damages that can be secured following an incident, through the advertising of no win, no fee lawyers.”
Claimant lawyers go where the business is and one clanging warning bell for insurers is an internet search for terms like ‘beauty salon claim’. A vast number will appear, suggesting this sector is indeed being targeted.
Take Bartletts, based in Liverpool. “Hurt in a salon? Female lawyers offer free advice,” the website advises. Just some of the incidents listed that might result in compensation include manicure and pedicure infections, injuries caused by cellulite treatments and semi-permanent make-up gone wrong.
Or the website of Joanne du Plessis, part of Gloucester-based Shires Law, which states: “The lack of statutory regulation in this rapidly growing industry is a major contributor to this issue as there is nothing to stop poorly trained or inexperienced beauty practitioners offering beauty treatments.” Her successes include securing compensation for a customer who had an allergic reaction to an HD Brow treatment that involved waxing, threading and tinting and another who suffered burns, blisters and hyper pigmentation to her legs after undergoing a hair removal treatment known as intense pulsed light.
This is not to suggest such firms allow fraud, but to show that solicitors will take such claims on a no win, no fee basis.
While it’s an area for female solicitors to offer an empathetic service, insurers may want to note that there could also be a rise in men making claims. Analyst Mintel pointed out almost half (47%) of young men have had a spa or salon treatment over the past year.
DWF partner Miles Hepworth, who is part of the fraud focus team at the Forum of Insurance Lawyers, describes fraudulent claims in the sector as “the ugly face of beauty”.
“The compensation culture remains alive and well in the world of beauty parlours and beauty treatments and one easily can understand why. It’s a growth area, eliciting a demand for treatment providers and not all can be suitably qualified. It’s an industry with regular new start-ups, often of short lifespan.
“As the claimant business model comes under increasing pressure and profitability, affected by the whiplash reforms, it’s inevitable opportunities are sought elsewhere. Equally, claimants may have gained new rights under the Consumer Rights Act 2015.”
This legislation gives consumers the right to ask for refunds for haircuts and beauty treatments if the service was not delivered with ‘reasonable care’. It might encourage more to seek higher sums through claims.
Hepworth adds claims firms advertising can include “evocative and encouraging language focusing on how lives are adversely affected and the emotional upset individuals may experience when treatment is carried out for a special occasion such as birthdays, weddings and holidays”.
Solicitors may list the numerous ways in which customers may be injured or accidents occur. “They confirm not only will claimants receive compensation for pain and suffering, but additional compensation for ‘loss of enjoyment’. This strikes me as somewhat enticing,” he says.
What can go wrong?
In quest of the perfect selfie, what can go wrong?
Botched beauty procedures can result in some unattractive outcomes
Claims could be for burns or allergic reaction to glue, eye damage or infection, or eyelids that get stuck together. Natural lashes could be damaged and fall out.
A fine needle injects semi-permanent dye into the skin – which should be patch tested. As with any tattooing, risks include blood-borne diseases. Further, allergic reactions could occur, at worst meaning disfigurement and even respiratory failure.
If the dermal filler is injected incorrectly, it could result in asymmetric lips, scarring or trout pout swelling.
The adverse effects of waxing include burns, blisters and swelling, in addition to skin tearing, infections and allergic reactions. With intense pulsed light or laser treatments, it is possible to suffer burns, blistering, loss or increase of skin pigment and scarring.
For microdermabrasion, tiny crystals are sprayed across the skin to remove outer layers. It can result in soreness, broken capillaries or crystals getting lodged in the eyes if proper eyewear is not worn.
Chemical peels may also cause severe adverse reactions.
While compensation can cost only a few thousand pounds, paying up could be a dangerous strategy if organised fraudsters get wind this is happening.
Hepworth points to ways of defending claims. “The credibility of the claimant is an important factor. Investigations into social media and close scrutiny of a claimant’s medical records and accident or claims history will often undermine credibility and lead to them not proving their claim. This also helps to challenge what is often subjective medical evidence.”
Stuart McLean, major and complex loss director for Questgates, says hair and beauty salons can be poor at keeping records. He adds larger chains tend to have better procedures, but then some are franchised, meaning less control. Salons need to prove they are not to blame.
“Business pressure is an issue. It might be hard for a small business or pop-up to turn away walk-in customers and patch tests often require 48 hours between test and treatment. Some may do the treatment to keep the business on the strength of the customer saying that they’ve had it before without problem.”
McLean adds some insurers are cognisant of the problem and are tightening up wordings to reinforce the business’s responsibility to help mitigate risks. “For example, the policy will refuse to indemnify the business if the therapist has failed to follow the instructions of the hair dye manufacturer and not allowed sufficient time between the patch test and treatment or left treatments on for too long.”
Rise in claims
Tristan Prince, chief commercial officer for Netwatch Global, believes there has been a rise in the amount of beauty claims, perhaps linked to the cult of celebrity or the refusal to grow old gracefully. His firm focuses on online investigation and social media intelligence.
A challenge in investigating historic claims for allegedly botched treatments is that injuries often heal naturally over time, he explains. “However, social media investigations provide a means to look back at the claimant at the time of the incident and provide a great way to gain insight into whether the claimant suffered the injuries in question and whether they were able to continue going about their life as normal.
“We’re able to locate and collate evidence in an advanced manner and use this where fraud is found, as well as help clients expedite cases where genuine injury was suffered.”
Since many are happy to depict their lives on Facebook, Instagram and other social networks, this is useful for those doing some probing.
Prince comments: “With some, there can be an unjust sense of entitlement, people want free cash and so are prepared to bend the rules.”
One thwarted case involved a woman who had a botched cosmetic procedure in Eastern Europe. She then sought to have it rectified in the UK but claimed the problems were caused here. When evidence was found she had been abroad, the claim unravelled.
Despite privacy rules, Prince points out: “We’ve seen some self-obsessed fraudsters who want to rant publicly on social media and don’t use privacy settings, helping us discover if what they have told an insurer checks out.”
He concludes that as beauty claims become more established, it’s likely to be “the secondary and tertiary waves that include increased fraud, so now is the time for insurers to refine investigation processes”.
A huge well done to all involved with organising our Remembrance Day event on Friday, including our Corporate Real Estate team. One of them, Ibrahim, took this incredible footage of poppies dropping as he (along with others) leaned (safely!) over the gantry to let them go. pic.twitter.com/pSbapkWBBR— Lloyd's (@LloydsofLondon) November 12, 2018
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