Keoghs Insight


Ruth Needham

Ruth Needham


T:01204 677283

It’s fraud, but not as we know it

Fraud Aware March 2019

As definitions and ramifications of the Civil Liability Act begin to emerge from the murk of uncertainty, it seems an opportune moment to reflect on our fraud files; analysing numbers, types and potential outcomes following the forthcoming reforms. After all, to determine what will occur in the future, we often need to look to the past.

Following the previous LASPO reforms there was an expectation that frequency in claims would reduce significantly and the cost of claims would invariably reduce. However it has become evident over time that the claim frequency has not been impacted long term by LASPO. This in itself does not mean that the same will apply following the forthcoming reforms. Yet the types of fraud which are on the rise and the geographical areas where it is occurring would suggest that fraud is here to stay.

Having reviewed the figures, let’s take a look at some of the headline findings.

Rings are a dominant force

Over the past three years we have seen a significant and steady increase in fraud rings. Whilst there has been significant media interest and public awareness of crash for cash, this is certainly not an indicator that organised fraud is on the wane. The type of fraud that constitutes a fraud ring has, however, changed with a rise in enabler-type fraud as opposed to historical organised gangs. Yet the numbers themselves have not reduced. Indeed, the greatest fraud type seen by Keoghs in the last three years has been fraud rings.

By the numbers

Based on location, Birmingham and Bradford still hold the dubious award for the top two cities where prevented fraud occurs. Having locked in the top two spots for 2015, 2016 and 2017, a review of 2018 suggests they are unlikely to lose those placings anytime soon.

Interestingly however, when focusing on fraud rings, Cardiff becomes a hotspot. While it doesn’t reach the top 10 in fraud generally, the Welsh capital has seen an 81% increase in the number of claimants linked to rings. Elsewhere the division of fraud type remains similar to figures in 2015 and 2016. Staged/contrived incidents seem to be on the wane although, interestingly, bogus passenger claims are increasing even after the implementation of Section 57. Indeed, there has been an 82% increase in such claims since 2015.

The top five areas in which fraud has been detected and prevented successfully are:

1) Birmingham
2) Bradford
3) Enfield
4) Cardiff
5) Liverpool

Whilst Birmingham and Bradford have been at the top for the last three years, there are some interesting differences with types of fraud. In particular, Birmingham has seen a 20% increase in opportunistic fraud and a huge 78% upturn in exaggerated claims over 2016 and 2017, which is indicative of a significant increase in exaggeration type claims across the market. Not surprisingly Birmingham accounts for 36% of all fraud rings established and thisc probably lends itself to the Operation Tyrell work which is ongoing across the industry and has become a substantial fraud ring. 

Outside of Birmingham, Bradford also illustrates the proliferation of fraud rings cases with 53% of all claims in the area related to rings, an increase of 5% on the previous year. Otherwise induced, staged and even credit hire have remained much the same.

The other interesting geographical entrant in the top five is Enfield which boasts more bogus passenger claims than staged/contrived cases - a big change compared to two years ago. Two thirds of fraudulent claims here are organised, suggesting that the London borough is, perhaps, more advanced than other areas.

Liverpool comes in at number five in our top 10, with 37% of all claims here relating to LSI, a 146% increase on previous figures. Whilst this is spread across 18 postcode districts, L11 has the highest number of LSI links. Outside of the top five, it is worth noting that 45% of all fraud in Leeds is linked to fraud rings with 38% in the LS7 and LS8 area. Eleven of those were linked to exaggerated loss which is, again, reflective of the increase we have seen across the market.

Newham has seen a slight increase in overall numbers, with 43% linked to fraud rings. Exaggerated claims in this area were up 75%, whilst there was a drop in induced incidents and a slight increase in staged/contrived. Manchester remains largely the same as previous years, although induced cases were down and staged/contrived has reduced significantly by 31%.  For Harrow it is worth noting that, whilst bogus passenger links have increased by 56%, other opportunistic fraud has not changed.

Finally, whilst Salford has previously been marked as one to watch, an increase in the latest numbers is generally due to fraud ring links as opposed to opportunistic fraud.

Opening the door for exaggeration

So, what can we glean from these figures which will help predict the post-reform fraud landscape?

There is no doubt that the significant increase in exaggeration is key. Backing up our findings, some clients are seeing increased numbers of exaggerated claims by as much as 64% year on year.

It’s certainly not hyperbole to suggest this demonstrates a market already in a phase of reform proofing, or at least attempting to position itself under the radar of detection post-reforms. The ability to detect exaggerated claims is Significantly inhibited by an automated system which relies on genuine claims being resolved as swiftly as possible. Given the whole purpose of the reforms is to increase the speed and efficiency with which this area of claims is processed, they are presenting a significant opportunity for fraudsters, allowing more money and claims to slip through the system without identification.

This presents some clear challenges for the future:

These claims must be identified (and quickly)

We cannot rely on the traditional old model of fraud identification

We cannot assume that a genuine incident means everything claimed is genuine

Fraud has not gone away and, in fact, continues to increase. As a result, there is justification for the time and management of these claims.


Thriving under the radar

Claims layering may become the norm but this does not mean it has to be accepted as such. Consumer attitude and behaviour has not altered because the reforms are coming, with the same expectations that there will be a payout following a minor incident. The public in general is not particularly concerned if others make money in the process.

This, in itself, allows for market growth that the fraud industry may not yet have prepared for, or be developed enough to identify. In summary it certainly looks like fraud investigations are here to stay. Whilst it may be more difficult to identify, it is certainly still present and has the potential to thrive in a post-reform world supposedly designed to eradicate it.