How to … Avoid fraudulent insurance claims

Although there is no typical fraudulent claim, the majority are for personal injury due to an accident or illness caused by the condition of the housing. The average cost of a successful claim can be around £6000 and some housing providers receive up to 10 claims a week.

Clearly, it's important that housing providers consider practical ways of defending claims and, more importantly, of reducing the incidence of claims in the first place.

Traditionally, fraud has been addressed in a reactive manner, meaning there's great scope for innovative anti- fraud practices to be set up. Zurich Municipal has worked with a number of housing providers to highlight the benefits of sound risk management and the ability to demonstrate systematic procedures for recording repairs and processing claims. However spurious some claims may be, it still takes time and money to address them and process them, and many will stand the test in court.

Get your records straight
Adhering to basic procedures can improve housing providers' chances of defending a potential claim in court, and save money in the long run if a claim is made.

Social landlords should keep up-to-date, cast-iron records of work carried out, along with any reports of damage made by tenants. Effective record-keeping includes four stages: record, categorise, prioritise and action. This kind of well-structured audit trail is one way to help identify potential problem areas early.

Some local authorities also ask their rent and refuse collectors to report damage as part of their usual work; others carry out "zoning", where work is done in specific locations at particular times of the year, rather than relying on tenants to report damage. Both tactics are based on the premise that prevention is better than cure.

Talk to your insurers
Education also plays a vital role in any anti-fraud programme, so sharing data effectively between housing providers and the insurance industry is an integral feature of tackling fraudulent claims. Zurich is currently rolling out an internal database which records intimate details of suspected fraudulent claims; this helps with the identification of risks and allows patterns to be investigated. People who claim fraudulently once are more likely to do it again elsewhere, so spotting similarities is an important tool in recognising such claims.

Keep staff clued-up
A recent case in the south of England highlights the importance of training staff so they can identify potentially fraudulent claims. The claimant – who was in prison for grievous bodily harm, burglary and the supply of class A drugs – alleged that his son had fallen and sustained a leg injury due to defective lighting in the home they rented from the council. But, following enquiries, an interview with the boy's mother confirmed that their son had told her he had never been injured. The claim was repudiated and the local authority saved itself £1000.

Key staff should act as focal points for identifying and referring suspicious claims, and for rolling out dedicated claims fraud training to other employees. Efforts to tackle fraudulent claims need to be publicised internally and externally.

Treat suspect cases as special
All fraudulent claims need to be identified as early as possible in the life of a claim – preferably, well before the claimant appoints a solicitor. The claim should be removed from the normal claims processing procedure and treated differently. Open and frank dialogue can prove to be very effective, as can early notification that the claim is to be investigated, with an outline of the reasons why. Providing the suspected fraudster with the opportunity to withdraw his or her claim can often halt any further proceedings – fraudsters, even when legally represented, frequently withdraw a claim when tackled head on.

In one such case in the South-east, a claimant had alleged that a housing association's failure to repair his home caused him serious spinal injuries when he slipped on defective plastering and fell down stairs. Before the trial, the claimant's credibility was called into question through evidence which showed a remarkable recovery from the reported injuries. Then, under cross-examination, he unexpectedly capitulated on his original statement, changed his accident description and confirmed he could not recall what had caused him to slip. The judge therefore found for the defendants. As a result of his change of heart, the landlord saved a potential £150,000.

Insurers are in the business of paying genuine insurance claims and we must continue to take steps to ensure that housing providers, and ultimately taxpayers, do not have to subsidise the dishonest actions of the fraudsters.