Insurance fraud reaches historic highs: nearly 9% of claims are fraudulent

• The effects of COVID, the loss of citizens' purchasing power, and new forms of fraud detection based on Artificial Intelligence have led to historic highs in attempts to defraud car insurance: almost 9% of claims declared in the last two years were fraudulent, 5 times more than in 2009.
• The typical profile of a fraudster is that of a young unemployed or precariously employed man, to which has been added the profile of a man over 40 years old. The most common scam involves attempting to include non-accident-related damages in a claim for an older car (11 to 14 years old), usually due to a lack of coverage in the policy.
• Particularly concerning are organized networks, groups of criminals committing carousel fraud across different insurers with the aim of obtaining compensation by falsely declaring injuries. These networks are led by 2 or 3 ringleaders and typically defraud an average of over 8,300 euros per case, 10.5 times more than fraud committed by individuals.
• In the last two years, Línea Directa detected 211 criminal organizations, an 11% increase from the previous Barometer, an increase due to the end of lockdown and mobility restrictions. The figures are alarming: in a decade, the company has detected more than 900 mafias dedicated to defrauding insurers.
• Home insurance fraud remains stable (2.6%), although the lockdown caused a temporary increase in attempted scams. The most common deceits include declaring damages before the policy's signing and simulating accidents. In terms of the average cost, the amount reaches 556€ per claim, a 19% decrease compared to the previous Barometer.
• By provinces, Cádiz, Málaga, and Cantabria have the highest proportion of insurance fraud, while Teruel, Soria, and Zamora have the least. Regarding organized networks, Murcia is the region with the highest proportion of mafias based on its population.

Madrid, February 6, 2024. Motorcyclists claiming to have had an accident at a gas station when, in reality, they were racing at full speed on a race circuit; an individual demanding permanent disability compensation and an expensive home renovation to accommodate their alleged disability while continuing to work normally in their bar, or a worker on prolonged sick leave who, despite the accident and "serious" injuries, demonstrates an excellent football touch.

These are some of the schemes that specialists, experts, and detectives at Línea Directa Aseguradora have successfully exposed and documented in the "VII Barometer of Fraud in Auto and Home Insurance," analyzing over 110,000 fraud attempts that occurred in 2021 and 2022. Additionally, the report, the first and most extensive in the entire insurance sector, breaks down the evolution of insurance fraud over the last 14 years (2009-2022) and analyzes the activity of numerous organized networks attempting to deceive insurers.

The most significant conclusion from the report is clear: auto insurance fraud continues to grow, as 8.8% of claims reported in the last two years were attempted scams, almost 5 times more than in 2009. The reason for this increase is the current economic situation, marked by a reduction in citizens' purchasing power due to inflation and rising interest rates. Furthermore, detection methods based on Artificial Intelligence have been improved, enabling the identification of parameters, highlighting possible connections of those involved, and exposing inconsistencies in their statements.

The most common profile of an insurance fraudster is a young man under 30, unemployed or with precarious employment. In recent years, this profile has been joined by that of a man over 40 engaging in these practices to obtain "extra money" or avoid paying for repairs. The most common scam involves trying to include damages unrelated to the accident in the claim, often seen in older cars (11 to 14 years old), on the right side of the vehicle, and generally due to a lack of coverage in their insurance to repair the declared damages. Regarding the timing, there has been a shift in frauds from summer to autumn (October and November), with Mondays and Tuesdays being the most favorable days for deceits.

According to Mar Garre, Director of People, Communication, and Sustainability at Línea Directa: "In the last two years, the proportion of insurance fraud has increased significantly, mainly due to the economic situation. Additionally, the introduction of technological elements based on Artificial Intelligence is proving decisive in improving the detection of a crime that harms all drivers, significantly increasing the price of policies and, in the case of organized networks, is especially dangerous."

Organized networks regain their activity

While individual insurance fraud is reprehensible, what worries insurers the most are organized networks—groups of criminals committing carousel fraud across different companies to obtain compensation by falsely declaring injuries. Often connected to more serious crimes, these networks are led by 2 or 3 masterminds and typically defraud an average of over €8,300 per case, about 10.5 times more than individual scams. Frauds by these groups often involve simulating accidents that never occurred or directly causing them, sometimes implicating innocent third parties.

In the previous Barometer, the lockdown and mobility restrictions resulting from the pandemic had caused logistical challenges for these organizations. However, the return to normalcy has brought the activities of these mafias back to levels prior to COVID-19. In the last two years, Línea Directa detected 211 criminal organizations, an 11% increase from the previous Barometer, bringing the total number of identified mafias to over 900 in the last 9 years.

Where do insurance frauds occur the most?

Línea Directa has also updated its fraud map in Spain by analyzing over 100,000 detected frauds in the last two years in its Auto insurance portfolio, covering nearly 2.5 million insured cars.

By provinces, the territories with the highest proportion of fraud are Cádiz (11.6%), Málaga (10.8%), and Cantabria (10%), all well above the national average (8.8%). On the other hand, the "emptied Spain," with Teruel (3.4%), Soria (3.4%), and Zamora (4.9%), has the lowest percentages of deceits.

Thus, auto insurance fraud appears concentrated in three different areas: the southeast axis from Alicante to Cádiz, the northern axis from Cantabria to Navarra, and finally, Barcelona and its surrounding area.

Regarding mafias, Línea Directa has established an indicator based on the number of detected mafias in each Autonomous Community and the population of each territory measured in millions of inhabitants. Once again, the Region of Murcia leads the ranking, with a rate that is 4.5 times the national average. It is followed, at a considerable distance, by Andalusia and Cantabria.

Home insurance, stable values

Regarding fraud in Home insurance, the Línea Directa Barometer indicates that attempted scams in this category reached 2.6% of reported claims. A figure that suggests fraud attempts in this line of business remain quite stable over time, although there has been a slight increase due to lockdown and mobility restrictions imposed following the pandemic.

The most common scams usually fall into two types: attempting to have the company cover damage that occurred before the policy's signing and simulating accidents. Regarding their average cost, the amount reaches €556 per attempted fraud, a 19% decrease compared to the previous Barometer.

Drivers justifying fraud

To complete the Barometer, Línea Directa sought to gauge public opinion on scams against insurance companies, obtaining surprising responses. 40% of Spanish drivers justify deceiving their insurance company, and 16% believe that insurers are partly to blame for frauds "due to their excessively high prices." Moreover, 63% of drivers who admit to committing insurance fraud "do not regret it at all."

Regarding the most common deceptions acknowledged by respondents, Línea Directa's study distinguishes two different moments: contracting and opening an accident claim. In the former, the most recurrent deception is providing false information about the vehicle's technical characteristics, followed by the kilometers typically traveled each year and having one's garage. The goal is to pay less for insurance.

Regarding accident claims, the most repeated fraud is declaring damages unrelated to the accident and simulating a collision to gain financial benefit. In fact, 15% of Spanish drivers admit they could participate in fraud, and 10% could fake an injury if it brought them a benefit.