UK motor insurance fraudsters target Ireland’s compensation payouts

Motor insurance fraudsters are travelling from the UK to the Republic to stage crashes and target what they see as a lucrative and exploitable compensation environment, investigators have said.

Comparatively high levels of payouts coupled with strict data-protection laws preventing insurers from sharing information on claims histories and stifling detection capabilities are thought to make Ireland an attractive location to cheat the system. Insurance fraud has been linked directly to the rising cost of premiums.

"We have UK-based fraudsters who we know are coming regularly to Ireland based on intelligence," said Paul Holmes, a partner at DWF, a UK-based legal firm which has recently extended its counter-fraud team to Ireland. "The reason why they think it is a good jurisdiction is first of all because of massively increased damages they can get compared to the UK and second, because of the lack of data-sharing, they are much more likely to get away with it."

The level of criminal activity in which organised gangs simulate crashes and file compensation claims is unknown and investigations are not easy. Mr Holmes said there were also “extremely sophisticated” fraudsters based in Ireland carrying out staged crashes in England and Wales.

Organised crime is one of a number of issues behind spiking insurance costs for which Irish consumers have shelled out 66 per cent extra on premiums since 2011 and 25 per cent more in the year to September. Fraud is thought to cost about €200 million a year, adding €50 to individual policies.

With consumers looking angrily to insurance companies over rising prices, the industry has pointed to unnecessarily high damages, legal costs and shortfalls in anti-fraud measures, particularly in relation to data-sharing.

At a recent DWF conference, Minister of State for Finance Eoghan Murphy, who has chaired the cost of insurance working group looking into the issue, said the Government was well aware of data challenges.

"Intelligence-gathering and sharing is key to identifying fraudulent activity and the working group has examined how the introduction in the UK of the Insurance Fraud Bureau provides insurers with a mechanism for collating, sharing and co-ordinating activity," he said. "A potential recommendation emerging from our work is around the establishment of a fully functioning insurance fraud database here."

The current Irish database is considered limited and does not readily allow insurers access to the level of data that might flag patterns of abuse. Simultaneously, the question of compensation payments remains central to the debate. A recent survey released by AIG found 78 per cent of respondents believed average whiplash awards of €15,000 are too much, with suggested alternatives averaging at just €3,631.

"It would thus appear that there would be widespread public support for a significant judge-led across-the-board reduction in personal injuries awards," John Trainor SC, who has researched the area of court awards, wrote in an opinion piece on the industry citing the AIG survey. "It is likely that such reductions would also have significant political and industry support."

Mr Trainor looked to significantly differing guides for Irish and British courts. In one example, a broken femur attracted an upper award limit in the UK of €13,668 (Judicial College guidelines) compared with €59,100 in Ireland (Book of Quantum), a difference of 318 per cent. “Successful fraudulent claims enrich fraudsters many times more in Ireland than they do elsewhere.”

He said there was now a possible case to reduce damages in Ireland by as much as 50 per cent generally, while even a 20 per cent drop would “generate enormous savings”.