Fighting fraud and protecting the public purse
- Fraud against local governments cost a reported £2.1 billion in 2013
- While crash-for-cash scams have worked in the past, some criminal gangs are switching to fraudulent personal injury claims
- Local authorities must be alert to the risks of organised crime and ensure solid detection procedures are in place
Local government bodies may be being defrauded to the tune of more than £2 billion a year, a report from the Audit Commission has revealed.
An October 2014 report shows that fraud against local authorities cost a reported £2.1 billion in 2013 alone, and similar figures from Zurich Municipal are just as alarming.
Over a five year period, local authorities experienced over 7,000 fraudulent claims, which will have directly impacted on the provision of public services, as these bodies tried to detect potentially false claims cases.
But fraudsters are being uncovered. The Audit Commission report, Protecting the Public Purse 2014: Fight Fraud Against Local Government, stresses that fraud detection rates are now at record levels.
“Fraud is an ever-present threat in the insurance industry,” says Scott Clayton, Claims Fraud and Investigations Manager at Zurich Financial Services. “However in recent years, there has been a noticeable shift to motor fraud, with organised criminals using schemes like crash-for-cash to exploit the system for financial gain.
Fraud is an ever-present threat in the insurance industry
Scott Clayton, Claims Fraud and Investigations Manager at Zurich Financial Services
“It’s a problem for anyone who has commercial vehicles on the road, as criminals will target vehicles they know to be insured, and those owned by local authorities are easily indefinable and on the road every day. Insurance companies have had to step up their game and strengthen their defences, as have local authorities.”
Crashing for cash
The need for closer examination was highlighted in March 2013 when Zurich Municipal aided in the successful prosecution of Mark Anthony Smith for staging a ‘crash-for-crash’ vehicle accident against Doncaster Metropolitan Borough Council.
The incident took place in a tunnel and was captured on CCTV, which showed Mr Smith manoeuvring his vehicle in front of a Doncaster MBC van and then deliberately applying his brakes, causing a collision. The footage also showed Mr Smith driving his car into the tunnel wall to cause additional damage.
As Zurich Municipal previously successfully defended a civil trial against Mr Smith in May 2011, the case was passed to the Insurance Fraud Enforcement Department and triggered a criminal investigation. The prosecution saved the local authority £100,000, which could have potentially been paid out to Mr Smith.
“Insurers are making it harder and harder for criminals to make false claims due to our increased scrutiny,” says Scott. “As a result, motor fraud is becoming a more managed risk, but criminal gangs are always looking for other areas to exploit in order to get a pay out.”
Increase in slip and trip claims
According to the Audit Commission’s report, exaggerated or fraudulent personal injury cases have more than trebled in recent years, with personal injury claims now the most dominant within the public sector insurance market.
The report also raises awareness of the importance of fighting fraud, and the need for local authorities to not only promote transparency, but also to improve their fraud detection procedures.
“These campaigns of deceit are all about trying to get as much money as possible out of the system,” says Scott. “Zurich Municipal can help local authorities by advising on preventative methods across the insurance sector.”
For local authorities, this means having a system in place to preserve any and all evidence, locate any CCTV footage and identify the parties involved.
“Having these sorts of procedures in place can help to validate the claim or provide leads for insurers to follow up on,” adds Scott. “It’s a very thorough process, which is why we invest heavily in our fraud team to ensure they are given the tools to investigate false claims and prosecute the people behind them.
“We are getting the message out there that insurance fraud is not tolerated and that the penalties for being caught are more severe than they’ve ever been.”
When fraud impacts upon the work of local authorities, every pound lost leads to a reduction in public services.
But the good news is that the fight against fraudsters is shifting – over the past five years, Zurich Municipal has helped councils make over £82 million in fraud savings – enough to buy just over 90 MRI scanners, 460 new bin lorries or 96,000 interactive school white boards.