Hire car fraud costs insurers and motorists millions
Criminal gangs are making millions of pounds in a new car insurance scam, a BBC investigation has revealed.
The con involves false claims for replacement cars given to motorists while their own car is being fixed.
Industry insiders say more needs to be done to stop the fraud, which is bumping up premiums and costing insurers an estimated £60m a year.
The Association of British Insurers said reducing and deterring such fraud was a "top priority".
Fraud investigators told the BBC's5 live Investigatesprogramme that criminal gangs were setting up bogus claims management and hire companies in order to cash in on the growing market in providing replacement cars.
The gangs, who view the crime as both lucrative and low-risk, use different methods to try to defraud the insurance companies.
In some cases they will charge insurers for a car they have not actually provided - known as a "phantom hire".
In other cases the gangs will "hire" the same car to several different people at the same time, claiming separately for each non-existent hire.
Fraudulent hire companies may also charge for providing a top-of-the-range model when in fact a basic vehicle has been supplied.
For example, in one case a hire car company said it had supplied a customer with a Maserati when in fact the driver had been given a VW Golf.
In another, an E-class Mercedes was claimed for when the actual vehicle supplied was a Ford Fiesta - which was £200 a day cheaper to hire. The car was hired out for 55 days, netting fraudsters £11,000 ($17,400).
The crime is known as "credit hire fraud" because of the way the insurance industry finances replacement vehicles.
Criminal barrister Judy Dawson told 5 live Investigates that the fraudsters involved believed they were in a win-win situation because there was little chance of being caught and prosecuted.
In some cases, Ms Dawson said, all that happened if a bogus claim was spotted was that the insurers would refuse to pay the invoice.
Transport select committee chairman Louise Ellman MP told the BBC: "This is shocking. It is one of the reasons why insurance premiums are going up.
"The new police insurance fraud enforcement department should address this issue as a matter of urgency."
Bedfordshire Police recently came across a major credit hire car scam when they were investigating so-called crash-for-cash crime - which is often linked to credit hire fraud.
The force investigated 60 staged road accidents and found the vast majority had a credit hire agreement attached to them, often involving "phantom" vehicles.
Detectives found that in three cases there were claims of nearly £40,000 for the hire of Jaguar cars which did not exist, but were supposedly loaned for six months.
Higher insurance premiums
Craig Dickson, head of credit hire at solicitors firm DAC Beachcroft, believes this type of fraud is on the increase because insurance companies are getting better at detecting other types of fraud - such as bogus personal injury claims.
An analysis of the fraud conducted by DAC Beachcroft estimated that it was costing insurers about £60m a year - which is 10% of the total credit hire market.
Mr Dickson said his firm had seen a 400% rise in the number of staged accidents not involving personal injury claims between April 2010 and May 2011.
"There is a gap in regulation in that organisations handling personal injury claims must be regulated by the Ministry of Justice," Mr Dickson explains.
"But if there's no personal injury, they don't.
"To some extent, anybody can set themselves up as a credit hire company because it doesn't involve personal injury."
A Ministry of Justice spokesman said the issue was a matter for the Office of Fair Trading (OFT).
In a statement, the OFT told the BBC: "Credit hire replacement vehicles for claimants is a focus of the OFT's ongoing market study on motor insurance premiums. The findings of the study are due in May 2012."
The Association of British Insurers (ABI) says around £2bn in insurance fraud goes undetected each year, adding, on average, an extra £50 a year to the insurance bill paid by every UK policy holder.
An ABI spokesman said: "Fraudulent road traffic accidents are often accompanied by inflated and bogus claims for credit hire, as well as for storage, recovery and repair of vehicles.
"Reducing and deterring insurance fraud is a priority for the insurance industry. Later this year, we will launch the Insurance Fraud Register - the first single industry-wide database of all known insurance fraudsters."