Is Your Business Paying The Cost Of Insurance Fraud?

According to the Association of British Insurers (ABI) some 107,000 claims worth a total of £730M were found to be false last year. In addition, the number of claims rose 30 per cent on the previous year, and continues to rise.

The recession has clearly had an impact on the rising number of fraudulent insurance claims. The consequence is that this cost will have to be passed on in the form of increased premiums.

To try and control these costs, businesses will need to look in particular at the type of insurance cover they have in place. Some businesses are also considering increasing the percentage of risk they "self insure" and handling claims arising from this "excess" in house. In doing this they are restraining the cost of their premiums and gaining greater flexibility in how they handle lower value claims.

There is a minimum level of insurance every business must have in place by law. Most businesses must have employers liability cover which protects them against claims from employees for accident or sickness they may suffer as a result of their employment.

If your company uses motor vehicles on the road, you must also purchase at least third party motor insurance. If your employees use their own vehicles for business they must have insurance that covers them for business use. If they do not then you may find a third party claim on your insurance on the basis that your employee was in the course of his or her employment when an accident occurred.

Businesses in certain professions, such as law, accountancy and financial services are also legally required to take out professional indemnity insurance. This protects against legal liability for losses suffered by customers as a result of negligence.

Beyond these there are a whole range of other types of insurance that you are not required to have but should have, such as public liability and product liability cover. There are yet further policies which may be sensible to have including key person insurance and business continuity cover. Knowing where to draw the line can be difficult and speaking to an adviser is essential.

Self insurance may not always be a practical option for a small to medium size entity, but many larger companies will self insure where cover is not compulsory. When claims arise, solutions which do not require legal action are often identified whilst in others, solicitors will need to be instructed to handle the claim.

Traditionally, companies instruct solicitors who act on behalf of their insurers, but more businesses are now seeing the value of having these claims dealt with by their regional business solicitors. In doing so they find they get a more responsive service, more in tune with their business approach and one which delivers better value for money.

Published 18/03/2010. The author of this article is Kelvin Farmaner