People left in a financially vulnerable situation from Covid-19 could be at risk of falling for ghost broking - a type of insurance scam where people posing as brokers use social media to sell fake insurance policies at a cut price.
That's one of the types of fraud worrying insurers, according to a UK expert who dialled in to speak at a webinar on fraud in times of recession hosted by the Insurance Council of New Zealand last week.
Stephen Dalton, head of intelligence and investigations at the Insurance Fraud Bureau in the United Kingdom, said insurers there had yet to see a rise in fraud as a result of Covid but they were expecting it.
"The view is from insurers is we expect there to be a significant rise in fraud. We haven't seen a huge rise yet. We haven't seen lots of Covid-related cases, the odd one or two.
"But there is a strong expectation we are in the calm before the storm."
In New Zealand insurers have already said they are preparing for a rise in fraudulent claims.
Dalton said during its last recession in 2008 the UK saw a 33 per cent rise in the value of detected fraud and a 31 per cent rise in the number of fraud cases reported and it was estimated that undetected fraud could be a similar level.
He said there were three areas insurers were expecting a rise in fraud; vehicle insurance, domestic property and liability claims.
Dalton said ghost broking of vehicle insurance was a real problem in the UK and a worrying issue for insurers.
"That is where you have individuals who will pretend to be insurance brokers and will offer their services to people and say I will use my expertise to get you a good deal. I will sort your insurance out for you just give me the money and I will get it all done."
Dalton said consumers received a policy document that appeared to be legitimate but the documents were false, which meant the person was uninsured.
"That is a big problem in the UK where individuals are selling their services on social media platforms."
Brokers have to be licensed in the UK, but Dalton said the fake brokers were able to get away with it even though they were not licensed.
"People will take up their services via social media platforms because they think this guy is able to get me a really cheap deal. Or they will look like they are legitimate and this is a business that is properly set up but in reality they will be producing entirely fake insurance policies."
"There is a real concern especially with a potential recession that that will be something people will be driven towards and also that those individuals will exploit people who are vulnerable."
Yvonne Wynyard, manager of the New Zealand Insurance Fraud Bureau, said while it was not aware of ghost brokering occurring in New Zealand, it did not mean that it was not happening.
"Because most policies bought by consumers are bought direct from the underwriter, the risk is reduced somewhat."
But she said if people had any doubts they should ask for the broker's details and check with IBANZ [Insurance Brokers Association of New Zealand] if they are registered.
"Because the UK is a bigger market, a ghost broker can get away with selling a large number of fictitious policies in a short space of time, before shutting down and going underground. The very few instances we do know off have been overseas brokers "selling" policies to unsuspecting individuals coming to NZ," she said.
Wynyard said people should also steer clear if the offer sounds too good to be true. She said any attempts from the broker to receive a direct payment were also a red flag.
"Make sure quotes and policy documents appear professional. If you have any concerns call the insurer, directly Google the broker, or check on IBANZ, check for professional qualifications.
"If the broker is being pushy or putting pressure on to make a quick decision, this is also a red flag."
Crash for cash
Dalton said with lockdowns easing and more people driving, vehicle insurers were expecting to see a rise in claims relating to staged accidents known as crash for cash.
This was where either both drivers were involved in the scam and would deliberately crash into each other in order to fake an accident and make a claim.
"The other way is a fraudster will go out on the road and deliberately create a collision by slamming on their brakes in front of someone and causing that person to crash into them."
If that happens, then the person who crashes into them is liable because they have crashed into the rear of another car.
"The fraudster has then created a claim and then all ancillary costs like personal injury, money for a new vehicle, vehicle for hire while car is being repaired, repairs can be exaggerated."
He said within motoring there was an expectation there would be increased misrepresentation at the application stage with more people misrepresenting themselves in order to get cheaper premiums.
"Obviously that creates a risk in the event a claim is made."
While the policyholder may have their claim turned down or policy voided because of the misrepresentation, a third-party claim could still go ahead, leaving the insurer on the hook.
Dalton said the other thing going on within motor insurance that was not fraud but was an enabler for it was claims farming.
This was where direct marketing companies would either ring people up or send them a text message and try and encourage them to make a claim - sometimes it will be based on leaked claims data or in other cases it will just be a blind call.
"They will ring up a hundred people in the hope they will get one or two that have actually had an accident in the last six months."
He said the direct marketers then encouraged those people to take a personal injury claim. In New Zealand that is not handled by private insurers but through ACC.
Dalton said the industry was also expecting a lot more opportunist fraud in the domestic property insurance and liability area.
"So that is one individual who has got a genuine claim or who is fabricating a claim but it is a one-off. They are not doing as part of an organised scam - they are just doing it to make some money because they just need some cash.
"There is a view that we will see a lot more exaggerated genuine losses."
That could be faking a burglary or claiming for expensive valuables that never existed.
"There is an expectation we will see a lot more of that activity."
Dalton said insurance fraud cost about £1.4 billion (NZ$2.7b) a year.
"The cost of fraud is passed on to policyholders, it is not a victimless crime. There has been a perception that because you are doing it to a business it is not really a problem."
But he said people were beginning to recognise insurance fraud actually cost them money.