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Law360, London (August 25, 2020, 12:32 PM BST ) The COVID-19 crisis will lead to a surge in fraudsters trying to persuade consumers to make claims for accidents they did not have or that did not cause them injury, an insurance fraud expert has warned.
Catherine Burt, the national head of counter-fraud at law firm DAC Beachcroft LLP, wrote in a blog that the pandemic and the recession it triggered will lead to an increase in the practice known as claims farming.
"There is no doubt that once the furlough schemes are over and the recession bites we can expect increased opportunistic fraud, with consequences for all lines of business," Burt wrote for the Association of British Insurers website.
Claims farming occurs when fraudsters encourage an individual to make a claim when there is no legitimate loss or injury, Burt said. This can happen when consumers receive phone calls offering help with car accidents they were not in fact involved in, but claim farmers can also bring claims without the consumer having any knowledge of it.
There have been fewer motor claims to farm amid the pandemic as the lockdown has forced Britons off the road. So the farming business has found other ways to take advantage of the economic crisis, Burt said.
"And old data will be trawled for any other claims from the last three years which can be brought before limitation expires," she said. "There is a good chance that opportunistic fraudsters will appreciate the windfall of a personal injury award for an accident where there were minimal or no injuries."
Burt said the DAC Beachcroft intelligence team has found that the number of claims management companies that say they handle COVID-19-related claims registered with Companies House has shot up since March. Some of these have links to known fraudsters.
British regulators have warned that the COVID-19 crisis will be a boon for scammers.
The Insurance Fraud Bureau, a not-for-profit body that investigates crime on behalf of the sector, said in May that so-called crash for cash scammers — who cause accidents and persuade the other motorist that they are at fault — may surge as drivers get back behind the wheel as lockdown restrictions are relaxed.
Charles Counsell, head of The Pensions Regulator, called in May for vigilance in spotting investment scams as anxieties mounted over household finances.
The Financial Conduct Authority has also cautioned that COVID-19 could potentially become a breeding ground for financial crime.
--Additional reporting by Irene Madongo. Editing by Ed Harris.
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