Crackdown on fraudulent claims set to make your insurance cheaper

The cost of your holiday and home insurance could be set to fall after the Government announced a crackdown on fraudulent claims.|

Chris Grayling, the Justice Secretary, has revealed that a new taskforce is to be set up to combat the problem of bogus insurance claims which costs the industry billions of pound each year and adds up to £50 a year to your household insurance bill.

A series of proposals will be drawn up in an attempt to bring down the cost of home and holiday cover. Keep reading to find out more.

Taskforce to recommend plans to clamp down on insurance fraud

The move by the Government follows a similar initiative in the motor insurance market which industry figures say led to a sharp reduction in premiums. The Daily Telegraph reports that customers are ‘expected to see similar benefits on other types of policies if the new taskforce is a success.’

Experts believe that the most common type of home insurance fraud is to exaggerate the value of a claim after a break-in. Here, policyholders claim a higher amount for goods that are stolen or even make up items in order to claim for non-existent goods.

Criminals made an average of almost £11,000 on insurance fraud across all types of cover last year.

The Justice Secretary, Chris Grayling, said: "The Government has taken big steps towards reducing bogus whiplash claims but the problem needs to be addressed more widely beyond motor insurance.

"And I believe there is scope to consider a broader number of issues which contribute to claims fraud more widely."

He said it was important to tackle the "perception among some consumers that insurance is ‘fair game’ and that making a fraudulent claim is a legitimate way to make some money".

The taskforce is set to report to the Minister in March 2015 and Mr Grayling said that the law could be changed to help combat insurance fraud.

Minister calls on insurance industry to do more to tackle bogus whiplash claims

While initiatives designed to tackle whiplash claims have already seen limits placed on the cost of medical reports, Mr Grayling called on the insurance industry to "step up to the plate" and do more.

Plans set to come into force in April will require experts who carry out medical whiplash examinations to be accredited by the Ministry of Justice. A new website will randomly allocate medical experts to new whiplash claims in order to break the link between claims management companies and the medical firms. The Government hopes this will stop disreputable claims managers from securing illegitimate medical reports in order to make insurance claims.

According to the Association of British Insurers (ABI), motor insurance premiums in the third quarter of this year fell by £2 to £356 and over the last 18 months the average premium has fallen by 7 per cent.

Huw Evans, of the ABI, said: "The Government’s commitment to tackle the UK’s whiplash epidemic is welcome, but more still needs to be done - including raising the small claims track limit - to tackle the issue. More widely, the insurance industry is committed to reducing insurance fraud to protect honest customers, and is already investing over £200 million a year in tackling the problem.

"If the taskforce is to be effective it needs to tackle claims management companies, which are driving the high volume of exaggerated and fraudulent claims.”

The Telegraph reports that the ABI detected 118,500 bogus or exaggerated insurance claims last year, equal to 2,279 a week, worth £1.3 billion, up 18 per cent on 2012.