Beachcroft reveals findings of 2011 Credit Hire Fraud report

Analysis of fraudulent credit hire claims handled this year by Beachcroft has revealed that 85% involved credit hire organisations which did not subscribe to the ABI’s general terms of agreement. Over 46% of suspicious claims had a “phantom” element, including hirers, hire vehicles and even companies which did not exist. Between April 2010 and May 2011, the number of credit hire
claims involving ‘staged accidents’ but no personal injury increased by 412%. These are among statistics published today in a report into credit hire fraud by Beachcroft.

Recognising the success insurers have had in countering fraudulent motor personal injury claims, the report encourages insurers to align their credit hire and fraud strategies closely, to achieve the same results in tackling credit hire fraud.

“Approximately 80% of credit hire claims, which insurers face, emerge from the ‘volume’ credit hire market,” explains Craig Dickson, head of credit hire at Beachcroft and the report’s author. “Consequently, insurers tend to focus their credit hire strategies on limiting indemnity spend by establishing accelerated processes to avoid penalties for late payment. Fraudsters understand these systems.

“Insurers’ fraud strategies, by contrast, concentrate on preventing and detecting fraudulent claims; this is the approach insurers need to take against fraudulent credit hire claims,” he said.

Beachcroft’s credit hire team analysed data from credit hire claims provided by 22 general insurer clients, including personal lines, commercial, composites and Lloyd’s market motor insurers, using a specially designed analysis tool. Developed over the last 18 months, Beachcroft’s Intelligence and Behavioural Analysis Toolkit (iBAT) enables it to investigate and analyse trends in credit hire claims and credit hire fraud.

The report identifies and defines nine different types of credit hire fraud. The largest individual credit hire fraud claim seen by Beachcroft exceeded 250,000, while the most expensive credit hire ringed/network fraud claim was for over £1 million.

It also reveals ‘sharp practices’ by some credit hire organisations, particularly over the recovery of interest and prolongation of repairs. Between February 2010 and January 2011, Beachcroft defended claims for interest worth over £1.3 million to which the credit hire companies were not entitled.

“While it’s impractical, and usually undesirable, to treat every credit hire claim as potentially fraudulent,” he concluded, “best practice should be designed around validating genuine claims, and where fraud is suspected challenging those claims in the courts if necessary. Improving the knowledge and skills of claims handlers to detect and handle credit hire fraud will be essential, given that more than 80% of those questioned for the report felt that their knowledge of this area was insufficient.”