Property journalism ~ Hell and high water at home? Me, too

The Observer, June 2005

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Damage claims from flooding, leaky roofs, burst water pipes and freezing water tanks always spiral during storms and cold snaps. But there's a more sinister side to the bad old British weather. It's a practice known as spiking - the insurance industry's word for the flurry of home cover frauds that occur during murky spells.

A recent survey by fraud investigators revealed that these shady insurance claims soar by 400 per cent during bouts of bad weather. Tornadoes, hurricanes, tempests - dishonest claimants will use any old condition to earn a quick buck. The storms that struck North Yorkshire last weekend could lead to hundreds of false water damage claims from homeowners piggybacking on genuine claims.

'Opportunistic fraudsters run riot in storms and bad weather, often making repeated claims and then changing their address to get away with it. The rough conditions bring out the worst in owners, who see insurers as fair game for scams, particularly if they have been paying premiums without a claim for 10 years or more,' says Jason Peto, director of Conversant Data, sponsor of the home fraud survey.

One Hampshire householder changed his home insurer three times in three years so he could make a succession of claims for flood- damaged carpets. 'The claims were for around £800 a time and each carpet was from a different room in the house,' says Peto. 'However the owner was caught out when his insurer became suspicious during the fifth claim. So his plan to redecorate his home at the insurers' expense was never quite fulfilled.'

Bad weather can also provide cover for burglaries and break-ins, resulting in both genuine and fraudulent claims, says Peto. Not long ago the owner of a detached house in Kent made a burglary claim for £40,000 of hi-fi and DVD equipment, three computers, televisions, laptops and various smaller items. When the insurance company checked out the theft report at the local police station, it found a far smaller list. The stolen items were actually worth £5,000.

The fraudsters' favourite is the kitchen destroyed by a mystery water- leak, while multiple-CD thefts are veritable classics of the genre. A spokesman for the Metropolitan Police's anti-fraud squad says: 'Devious homeowners have a habit of turning small leaks into large floods, and instead of claiming for a few soiled items send in a £10,000 bill for a new kitchen, while a few damaged discs will suddenly become a 400-CD burglary haul which, when valued at £10 apiece, nets the claimant a cool £4,000.

'One of the biggest problems is the massive piles of paperwork in most insurance company offices. Staff are under pressure to get through their workloads quickly and [fraudulent] claims get overlooked in the process. Insurers also have a tendency to err in a client's favour as they are petrified of being shown up or getting bad publicity for rejecting a claim.'

A report by the Association of British Insurers (ABI) shows that almost half the UK's homeowners have thought about exaggerating or making a fictitious claim on their home contents or buildings insurance policies. Another 7 per cent admit to at least one dishonest claim, while more than 3 million are either caught or disappear when trying to outwit their insurer.

ABI spokesman Malcolm Tarling says: 'The typical fraudster has the same characteristics as the average insurer's best customer - middle- class, married, well-educated and comprehensively insured - an apparently respectable person who sees insurance as a way to make a bit of extra cash.'

A disturbing 40 to 45 per cent of home frauds are never detected, reveals the Conversant Data report. Most of them are for personal possessions and for sums under £1,000. 'Policyholders and organised fraudsters know insurers are unlikely to ask too many questions about the smaller claim or an item that is tricky to identify,' says Peto.

Many false claims are made miles from the policyholder's home. Fraudsters 'plant' team members in call centres and then use confidential information for bogus home claims. 'A lot of personal data is fed into call centres and it's all too easy to use it for crimes,' says Peto.

The government is already introducing legislation to combat this problem. An anti-fraud bill had its second reading last week.

The ABI's Tarling says: 'Catching home insurance fraudsters is too low on the police's crimes agenda, which explains why so many people get away with it. The UK needs far more rigorous targeting and detection methods, as well as more effective data sharing.

The new act will instill the fear factor into dishonest homeowners and organised fraud networks. Criminal prosecutions, jail sentences and criminal records are the best possible deterrents for this worrying and escalating crime wave.'

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