Insurance fraud hits firms

The scam could have cost millions of pounds

More than 1,000 people in Northern Ireland have fallen victim to an insurance scam involving the loss of millions of pounds.

The fraud, described as potentially the biggest to hit the industry in 20 years, affects public liability insurance with the owners of small businesses worst affected.

The Serious Fraud Office, supported by the Police Service of Northern Ireland, have begun an investigation into the scam which could have cost £3.5m in lost premiums.

Detective Chief Inspector Larry Cheshire who revealed details of the fraud on Wednesday, said that amount equated to a potential uninsured risk of almost £1b.

He said there had been no arrests, to date, but the fraud was widespread and business people in the province needed to be made aware of it.

"This has a huge potential to impact heavily on the economy of Northern Ireland, which is why we are taking it so seriously," he said.

The investigation centres on potential fraud dating from the beginning of 2000, but Mr Cheshire said there was nothing to suggest any paramilitary involvement.

Police investigators have searched the offices and home of one insurance broker in Northern Ireland and searches of eight other brokers are being conducted in south Yorkshire and Leicestershire.

My advice is that anyone who has any doubts over the validity of their insurance cover should check immediately with their broker to make sure that it is valid

Larry Cheshire
PSNI

PSNI Fraud Unit members are also assisting colleagues from the Central Scotland Fraud Unit to investigate a similar Scottish-based fraud involving some 400 victims in Northern Ireland.

Mr Cheshire said insurance companies appeared to have been "duped" by rogue brokers.

"It is entirely possible that some business people throughout Northern Ireland are not insured for public or employee liability, even though they have paid premiums and in some instances have even received an insurance certificate," he said.

"My advice is that anyone who has any doubts over the validity of their insurance cover should check immediately with their broker to make sure that it is valid."

'Grossing up'

He said the fraud appeared to be targeted on small businesses, such as firms in the construction industry, and other organisations needing liability insurance for public halls and social clubs.

The Scottish end of the scam appeared to have been directed particularly at the Orange Order, the Masons and social clubs.

Mr Cheshire said he believed there had been a number of claims submitted that would not be paid out, with the liability subsequently falling on the business or organisation affected.

During the course of the police inquiry, investigators also uncovered an insurance industry practice known as "grossing up".

Mr Cheshire said that meant an insurance broker secretly added a fee to the insurance company's quoted premium, despite the fact that the broker's commission was already included in the premium quoted.

In some instances this led to premiums being inflated by as much as 100%, he said.

The practice is banned by voluntary regulatory bodies, including the General Insurance Standards Council and the British Insurance Brokers' Association, but is not in itself a criminal offence.