A study by AXA among small business owners reveals that insurance fraud is a real issue with one in three admitting they have inflated, or would inflate a claim while one in ten would bend the truth when applying for a policy.
Research carried out among hundreds of small British businesses suggests that while the majority are honest, the numbers exaggerating or even fabricating, claims could run to tens of thousands a year with the average claim value being raised by around 17%, or approximately £640.
When asked what they would consider “acceptable” when making a claim, around one in ten small business owners said it was okay to inflate the value of goods stolen and a similar number would lie about having locked up and alarmed their premises. More seriously, around a fifth would consider it acceptable to fake a whiplash claim or a minor accident at work in order to make a claim. Tradesmen and retailers top the list of sectors where people have exaggerated claims.
Furthermore, the research revealed that small business owners would be 25% more likely to make a fraudulent claim on their business insurance than their personal insurance.
Matthew Reed, Managing Director, Commercial Intermediary said: “Some people seem to think insurance fraud is a victimless crime but it’s not. Honest customers end up footing the bill through higher premiums as insurers are forced to pass on the additional costs of inflated claims. Brokers are the ones that have to pass this message on to their clients which is never an easy one, particularly during a recession. They know better than most that the last thing their small business clients need are added costs.”
As well as exaggerating claims, some business owners admitted that they would be prepared to tell a few untruths when it came to applying for insurance:
– one in ten said they would deliberately under-value their business to get a lower premium
– a similar number would not mention they used their car for business and simply buy personal cover, again to keep premiums down
– around 5% would not mention previous convictions and 3% would omit to mention previous claims.
Matthew Reed concludes: “Our industry has developed increasingly sophisticated processes to stop fraudsters but insurers do need the support of brokers to help educate the minority of small business owners who commit these frauds, whether intentionally or not, that getting caught could mean the end of their livelihood. If a broker does identify any client trying to inflate a claim for example, we would urge them try to persuade their client that it is in their long-term interest to do otherwise. After all, they not only run the risk of having any claim turned down, but also, in serious instances, risk criminal proceedings and problems getting any insurance in the future.”
