CILA Black Archive

In this new column, CILA reports on amusing and interesting stories from the Insurance world.

Christmas Crackers

To amuse you over the festive season we publish the finalists in the Citizens Against Law Suit Abuse 2007 Worst Case of the Year. The winner didn't take his cleaner anywhere.

LAW DOG

A member of the Los Angeles Fire Department sued for racial harassment after being served dog food as part of a firehouse prank. The Los Angles City Council initially agreed to settle for $2.7 million but after intense public outrage and photos of the plaintiff playing similar pranks on other firefighters surfaced on the Internet withdrew the settlement, only to settle for $1.43 million a few weeks later.

DOPED UP

A pharmacist was fired after leaving the pharmacy unattended and allowed a technician to use her computer to issue prescriptions, including a fraudulent prescription for a painkiller. She sued, claiming she was fired for having asked for a raise and that no males had ever been fired for her infraction. A jury awarded the pharmacist $2 million, including $1 million in punitive damages.

(USA Today, June 20, 2007)

CHEESEBURGER FROM HELL

A man, his mother and his friend are suing McDonald's for $10 million. Jeromy Jackson claims to have ordered two Quarter Pounders with no cheese at the McDonald's in Star City. Jackson says he bit into the first burger and had a severe allergic reaction to the cheese melted on it. He recovered and set about revaluating his life by issuing a lawsuit against the restaurant chain. He claims he was only moments from death.

RATHER STUPID

Dan Rather filed a $70 million lawsuit against CBS, alleging that the network made him a scapegoat" for a discredited story about President Bush's National Guard service. Rather says the complaint stems from "CBS' intentional mishandling" of the aftermath of the story. Rather, the former anchorman of the "CBS Evening News," is seeking $20 million in compensatory damages and $50 million in punitive damages.

COMPUTER FRAUD

A high school senior hacked into his teacher's computer to obtain test questions. He was given an "F", and suspended. In response, the student and his parents are suing the teacher and the board of education for monetary damages and changes to the boy's grade and records claiming the boy was entrapped into misconduct, the teacher didn't adequately reach out to him and the process was mishandled by the district.

(Ravenna Record-Courier, May 3, 2007)

BROKEBACK BACKLASH

A 12-year-old girl sued the Board of Education and others after watching "Brokeback Mountain" in class, seeking more than $400,000 in damages due to the psychological distress inflicted on her by the movie. The defendants are charged with negligence, false imprisonment and intentional infliction of emotional distress. The suit claims the girl is undergoing psychological treatment and counselling.

(Chicago Sun-Times, May 13, 2007)

SHOTGUN MARRIAGE

A marital spat resulted in a lawsuit against the couple's shared employer. An adulterous police officer was shot by his wife, also a police officer, after she discovered he had strayed. The wounded officer sued the NYPD for $3 million, claiming the department should have known his wife was too crazy to carry a gun.

(New York Post, March 31, 2007)

SMELLS LIKE MONEY

A woman's suit against the city of Detroit claims her coworker's perfume inhibited her from doing her job. She's seeking "unspecified damages." However, she may be feeling optimistic since in 2005, a deejay in Detroit was awarded $10.6 million after she claimed to be sickened by a coworker's perfume. That award was later cut down to $814,000. (Detroit News, July 4, 2007)

Crime Up

The latest findings from the AXA Business Crime Index reveal the number of business crime claims settled between April and June 2007 was 11 per cent higher than the same period in 2006.

Malicious damage claims, a term which covers acts of vandalism such as deliberately smashed windows and grafitti, have increased by 28 per cent between the two periods. More worrying still, the number of arson claims have risen by 43 per cent. It's not all bad news for businesses however, as incidences of theft have decreased by two per cent.

Not truthful

A study released by independent personal finance website Fool.co.uk reveals Brits' propensity to lie to others and themselves about their money.

This can lead to increased levels of stress and debt as they fail to face up to their financial situation:

One in six (16%) Brits have lied about their debt situation
One quarter (22%) of young people are dishonest about their debts
Over one in ten Brits (12%) don't open bank statements or other financial documents
Almost a third (28%) fluff the cost of luxury items to make them seem less expensive
One in five (20%) get so stressed about their financial situation they 'want to disappear'

Research from Direct Line Travel Insurance reveals that many travellers exaggerate and falsify their 'holiday losses' with more than one in 10 (11 per cent) admitting to increasing the value of their claim and five per cent to adding extra items. 13 per cent of Britons have made a travel insurance claim and 15 per cent admit they have stretched the truth. A 'white lie' or exaggeration on an insurance claim is fraud, yet many fail to realize the severity of their actions.

To justify these claims and clear their conscience, two in 10 (18 per cent) say they are owed the money because they haven't claimed before. Others substantiate their dishonesty by saying everyone else claims so why shouldn't they (10 per cent). 13 per cent refuse to take responsibility for their actions, blaming their partners instead. Furthermore, this dishonest minority aren't doing things by halves either - 16 per cent are enhancing claims by £200 and six per cent by over £500. The Top False Claim Items:

Jewellery (25%)
Camera (23%)
Cash (14%)
Digital camera (12%)
Clothes (12%)
Mobile (10%)
Video/DVD (7%)
Ipod/MP3 (5%)
Designer glasses (5%)
Bag (5%)

Worryingly the younger generation (18-29 year olds) are the worst offenders with 33 per cent admitting to telling white lies on claim forms compared to more than two in 10 (21 per cent) of 30 to 50's and seven per cent of over 50's.

Half-term home damage by children & pets to top £100 million

Parents could face huge bills for accidental damage caused to their homes by their children, children's friends or family pets over the recent half term holiday, warns Sainsbury's Home Insurance.

The bank estimates that the cost of this could be as high as £106 million. With the poor weather, many children are likely to have spent a considerable amount of time in their homes during the half term holiday, increasing the chances of something getting broken or damaged. Sainsbury's Home Insurance estimates that as many as 900,000 people could experience some property damage caused by children or pets during half-term.

However, the bank says that for every incident of damage caused to a home by the children living there, as many as three incidents of damage are caused by their friends. Steve Johnson, Head of Sainsbury's Home Insurance said: "A week of having your children at home can be a challenge in terms of keeping them amused and entertained. If the weather is poor and they have to spend more time indoors, the chances of your home being damaged in some way by them or their friends increases."

In terms of specific rooms or areas that are most likely to suffer damage, most at risk from children and pets is damage to walls, carpets and flooring. Areas of the home that are most at risk from damage caused by children and pets:

Walls/carpets/flooring
Furniture & windows
Garage, doors & electronic equipment

CILA OFFICE MOVE

After 7 years at Peninsular House, the CILA will be moving on November 24th to more spacious premises, just down the road in Queen Street.

We hope that our new location, next to Cannon Street station, will be convenient for our members when they come to visit us.

Our new address will be:

Warwick House
65 – 66 Queen Street
London EC4R 1EB

Tel. No. 020 7337 9960
Fax No. 020 7929 3082

HONESTY IS THE ONLY POLICY AS INSURERS UNCOVER MORE FRAUDS

Insurance companies are uncovering and preventing fraudulent insurance claims worth over £1 million every day according to latest research from the ABI (Association of British Insurers).

The ABI's latest research into general insurance fraud reveals that:

Insurers are uncovering and preventing fraudulent claims worth £480 million a year, or £1.3 million every day. This is three times the amount detected in 2003.
One in 11 claims - around one million - are in some way fraudulent. Of these 85% involved exaggerating the value of a genuine loss.
Nearly a half of all detected fraud was on household insurance. Typical scams exposed include deliberately damaging carpets then claiming the damage was caused accidentally.

Nick Starling, Director of General Insurance and Health at the ABI, said:

"Fraudulent insurance claims cost £1.6 billion, and add £40 a year to the premiums paid by honest customers. But the industry is fighting back. Insurance cheats are more likely to be caught than ever before. And cheats will pay a high price as future insurance and credit will be more expensive and harder to obtain."

Some of the more unusual fraudulent claims uncovered by insurers include:

A man claimed for 'recovery expenses' following a heart attack he suffered while on holiday in West Africa, which was for the services of a local brothel!
A woman reported her husband for exaggerating his injuries following a car accident hours after he left her having collected a £385,000 compensation settlement.
A keen amateur footballer claimed to be unable to work following a back Injury. His fraud was exposed when a local newspaper carried his picture after he was named as his local football club player of the year.
A cash-strapped policyholder pushed his car over a cliff then claimed it had been stolen so he could pay his debts

Indicators

In the ABI reports there was a telling section, 'The propensity to take part in fraud and the characteristics of fraudsters'. 11% of adults (around 5 million) have committed claims fraud in the past 12 months. The ABI model shows:

People over 45 less likely to be fraudsters
Those paying more than £500 in premiums less likely
Homeowners less likely
Males 1.6 times more likely
People living in the North of England 1.7 times more likely
Those with unsecured debts above £1000 more likely
Those with household income of less than £10000 2.6 times more likely

UK: As clocks fall back, claims spring forward

What a difference an hour makes. That's the conclusion in a report that finds a wide variety of household and motor claims soar in the week following the end of British Summer Time.

The claims analysis by Norwich Union, the UK's largest insurer, finds that motor accidents, malicious damage, theft and fire all spike in the week after the clocks roll back. Halloween and Guy Fawkes Night also feature as key dates that could well scare homeowners and motorists. The key dates that are more "trick" than "treat" include:

Clocks go back, Sunday 28 October 2007
The number of motor collision claims following the clocks going back rises by around 15% as commuters struggle to adapt their usual driving habits and route to the darker times of day.
Halloween, Wednesday 31 October 2007
This is the worst day of the year for malicious damage in homes, when claims increase by a whopping 150% compared with a normal day . It's also the third worst day for malicious damage on cars, for which Norwich Union receives over double the amount of claims compared with a normal day.
Bonfire night, Monday 5 November 2007
Household fire claims increase by about 50% and claims for malicious damage to the home increase nearly twofold. This is also the worst day of the year for malicious damage to cars, when claims increase by around 1.4 times compared with a normal day. This is the worst day of the year for home theft, when claims increase by a quarter.

Plans to Reach Low Income Households with Insurance

35% of people in the lowest-income households (less than £10,000 per year) have no insurance at all. But they also need insurance most as they face higher risks from crime, fire and flooding. These are the findings of a report published by the ABI (Association of British Insurers): Access for All: extending the reach of insurance. The research for the ABI found that 44% of people in the poorest households purchase home contents insurance, compared with nearly twice as many (82%) in those with average incomes (£15,000-£30,000). Around a third had motor insurance and only a quarter had purchased life insurance.

When people with low incomes and no insurance have to replace stolen or damaged household goods, around a third of them borrow additional funds, increasing their indebtedness. The ABI report also shows that poorer households face far greater risks than their more affluent neighbours. For instance:

households with an income below £5,000 were 71% more likely to be burgled at least once compared with households with incomes of £30,000 or more
arson rates are up to 30 times higher in the most deprived communities
people with the lowest incomes are also much more vulnerable to flooding.

Rising tide of home insurance premiums

Six months of weather related claims have finally taken their toll on home insurance premiums, the AA Index shows. The July deluge over the South Midlands and Gloucestershire followed flooding in Yorkshire and the West Midlands, costing the insurance industry an estimated £3 billion. "We now see the result of that devastation reflected in premiums as insurers meet the cost of drying out and repairing homes as well as temporary re-housing of families while their homes were made habitable once again," says John Close, Insurer Relations Director at AA Insurance. "Some predictions that premiums would rise by 15 per cent were overly pessimistic and, although I believe premiums will continue to rise as insurers dip into their reserves, I expect competitive pressure will keep increases affordable.

"One positive outcome seems to be that those who had no contents insurance are thinking again, with many insurers reporting increasing business."

Home buildings insurance summary

Over the third quarter of 2007, the index of average quoted premiums rose by 3.00 per cent to £215.51 (over previous quarter: down by 1.89 per cent to £209.23)
Premiums have risen by 3.13 per cent year-on-year
The Shoparound premium (an average of the lowest three premiums for each risk quoted in the Index) rose by 5.79 per cent to £150.86

NHS faces £9bn bill for negligence claims

The National Health Service (NHS) expects to pay out £5.9 billion in known or expected clinical negligence claims - with a further £3 billion of claims possible, its accounts revealed. Figures for the NHS Litigation Authority (NHSLA) also showed the organisation paid out as much as £107 million in legal costs last year. Of these, £46 million related to defence costs and £61 million were claimant costs met by the NHS. The NHSLA is currently reviewing responses to a consultation paper for reforming the approach to clinical negligence - with the possibility of setting up a redress scheme for resolving disputes without resort to the courts. It hopes to adopt a more coordinated approach to dealing with with harn caused by the NHS.

Last year was the worst winter for thatch fires

Britain's 60,000 thatched cottage owners have been warned to double check their chimneys before they light their open fires and wood burners this winter.

The majority of thatched properties are in the South West and East of England. Last year was one of the worst on record for thatch fires in East Anglia - there were over 30 in Norfolk and Suffolk and 13 in Cambridgeshire.

The majority (around 90%) are chimney related - caused by wood burners and open fires with the fire starting in poorly maintained or faulty flue liners and chimneys. The heat transfers through the brickwork into the adjacent thatch, reaches ignition temperature and catches fire.

An investigation carried out by Norwich Union Insurance into 20 thatch fires over the last two winters has revealed the average cost is around £100,000 per claim.

Colin Connor, household underwriter at Norwich Union, says simple steps like having your chimney swept and flue lining inspected regularly can prevent future problems.

"While fires in thatch properties are rarer than in standard homes - mainly because of the extra precautions that thatch owners take - it is important to remember that once a fire takes hold in a thatch the damage can be much greater.

"The average house fire costs around £5,000, our figures show that the average cost for a thatched property is twenty times that amount."

Today's thatch properties mainly use water reed, combed wheat reed and long straw, all of which burn rapidly. The roof is also designed to repel water so it makes it doubly difficult for fire fighters to extinguish.

Of particular concern are wood burning stoves - an ever increasing feature in many period properties. It will surprise many to discover that wood burners can reach temperatures of around 600ºc - which is double that of an open fire.

Graham Joy, risk manager at Norfolk Fire Service, said wood burners were believed to be the main cause of thatch fires last winter.

"In every case bar one we attended a wood burner was involved and was alight at the time of the fire.

"Homes these days have huge wood burners that give out amazing amounts of heat so the flue gases reach much higher temperatures than the chimney was originally designed to take."

Thatch: Some facts

90% of thatch fires are chimney-related but other reasons include:

Electrical faults
Building works - use of electrics/naked flames
Discarded cigarettes
Garden bonfires
Rats, mice or squirrels can chew through wiring and cables leaving them vulnerable to catching fire.

Personal Injury Claims Up

The number of accident claims registered to the Compensation Recovery Unit (CRU) at the Department of Work and Pensions increased in 2006-7, rising by 8.3 per cent. Accident claims make up by far the largest proportion of all personal injury claims, accounting for 96 per cent of claims in 2006-7. Accident intermediaries National Accident Helpline and Injury Lawyers 4U recorded the first and second highest advertising spends respectively in 2006. National Accident Helpline spent £6.2 million on advertising, overtaking Injury Lawyers 4U which had recorded the highest expenditure in the previous year.

Datamonitor forecasts that the number of personal injury claims will grow by an annual average rate of 2.6 per cent between 2006/7 and 2011/12. By 2011/12 the number of claims will reach 775,958. The increase will largely be driven by further growth in the number of motor personal injury claims, which has seen strong growth in recent years.

Panic Buying

This summer's flooding has led to a 300% surge in the number of people taking out home insurance cover in the worst-affected areas. Financial website moneysupermarket.com are said it had seen a dramatic increase in applications for cover among people in towns hit by the floods, many of whom were applying for insurance for the first time.

It said applications from people in Sheffield and Hull leapt by 300% during June compared to the previous month, while applications from people in Doncaster, the West Midlands and parts of Scotland more than doubled.

Leaf London's trees alone

Up to 2,000 London street trees have been given the chop in the past five years, condemned by usually unwarranted subsidence claims, a London Assembly report reveals today. In some boroughs up to 40 per cent of trees removed have been due to insurance claims. Yet the Assembly's Environment Committee heard that barely one per cent of these claims were probably justified. A survey showed that, over the past five years, 40 per cent of the 325 trees removed in Hackney, 16 per cent of 1,500 trees in Brent and ten per cent of the 600 trees in Camden have been removed because of subsidence claims. In total London has lost around 40,000 street trees with 48,000 planted over the last five years. However London has suffered an overall loss of broadleaf trees and many of the new trees that have been planted are smaller, ornamental varieties. Ornamental varieties do not have the same environmental benefits as broad leaf trees, which play a vital role in protecting the capital from the effects of global warming.

The Assembly Environment Committee report, A Chainsaw Massacre, also highlights an urgent need for action from local authorities, landlords, developers and residents to increase the number of street trees as part of the battle against climate change. Darren Johnson AM, Chair of the Assembly Environment Committee said: "This report calls for direct level action to help London adapt to the effects of climate change and help maintain its status as one of the greenest cities on the planet. "London's treescape is changing. Our investigation has found a net gain of over 8,000 trees planted across the capital in the past five years. But we need to plant, maintain and protect more broadleaf trees which provide the real benefits for future generations."

The report identifies further measures to maintain and protect the capital's trees, including:

Insurance companies must provide better quality investigations with nationally recognised guidance to avoid pointless subsidence claims
Developers should include broadleaf tree planting and maintenance in the design and planning of new developments
Borough street tree data must be maintained and updated to allow for effective monitoring of London's treescape
Best practice on community engagement, funding, planting, maintenance and protection of street trees should be drawn together into a 'London tree survival guide'

The Committee called for London boroughs to explore funding and sponsorship from private developers through planning agreements to meet the cost of maintaining trees. Darren Johnson said: "Our recommendations put forward sensible and practical measures to safeguard the treasures of our streets. We all have a role to play in ensuring London trees continue to flourish."

First Anniversary for Insurance Fraud Bureau

This summer marked the first anniversary of the Insurance Fraud Bureau (IFB) which was launched by insurers to provide a cost effective, tactical solution for the detection and prevention of organised and cross industry fraud.

The Bureau has had a powerful impact in its first year of operation. Feedback gathered from members shows that the bureau has highlighted previously unidentified fraud risk where there is a combination of actual and anticipated savings of at least £8 million.

Principal amongst its achievements has been the completion of six joint police enforcement operations, with a further 14 joint police investigations underway. To date police activity has resulted in 74 arrests of key players within organised fraud networks. This will have caused severe disruption to those criminals and their organisations, at the same time sending a strong deterrent message to those planning to target the insurance industry in the future. Inevitably in the longer term this will result in an as yet unquantified reduction in the organised fraud risk faced by insurers.

Many of the IFB targets are believed to be involved in other forms of serious and violent criminal activity, including drug and fire arms offences, kidnapping, arson and investment, carousel and benefits fraud. Court cases and charges are pending and the IFB is now working to represent its members in applying for Proceeds of Crime Act compensation orders to make recoveries against the £5.5m of assets seized as a result of the arrests. This was not previously considered a viable, cost-effective proposition for individual insurers, and further demonstrates the power of the IFB membership working as a collective, for the benefit of all insurance customers.

Participation in the IFB gives its 46 members many other benefits and in particular early access to robust, high-grade intelligence which can be used to prevent and detect all types of insurance fraud. During the course of the year the Bureau has issued 370 intelligence reports to members relating to 2069 claims. This has enabled insurer members to protect all their customers by repudiating fraudulent claims and releasing reserves held against them. In addition insurers are able to search their records to identify new cases and see the wider market exposure on cases already identified as potentially suspect.

The Bureau also operates the insurance industry “Cheatline” facility (0800 328 2550). As a result of acute media interest in the activities of the IFB, calls to the Cheatline have increased by 175% over the last year and have provided further valuable intelligence to the industry, giving the battle to protect innocent policyholders a considerable boost.

In just one year, the Bureau has built up extremely good working relationships with a wide range of stakeholders and established a reputation for professionalism, efficiency and determination. Acting as a tactical, central point of contact has enabled the Bureau to work effectively with the Association of British Insurers, Serious and Organised Crime Agency, Ministry of Justice, the City of London Police Economic Crime Unit and the Solicitors’ Regulation Authority to develop a firm strategy to tackle organised insurance fraud.

These influential relationships have also enabled the IFB to raise awareness of the impact of insurance fraud at the highest levels. A debate in the House of Commons followed an IFB presentation on the scale and impact of staged and induced motor accidents to the All Party Parliamentary Working Group on Financial Services. As a result members have been able to build excellent working relationships with a number of Members of Parliament, supporting the ABI’s strategic call for further police resource to be focussed on the prosecution of insurance fraud.

The IFB’s reputation has also spread outside the UK and Europe. In recent months the Bureau has received approaches from Insurance Trade Associations in Italy, South Africa, Czech Republic, Sweden and USA, who are keen to understand how lessons from the UK model can be used as they either seek to set up or develop the capabilities of similar operations in their own countries.

John Beadle, Chairman of the IFB comments: “We owe our success to the massive commitment of our membership, and as an industry we must continue to remain focused and build on the foundations laid in this first year. Shared data, properly leveraged, is undoubtedly the crucial weapon in the battle to combat organised fraud and a logical next step would be for the industry to look at how it can expand the current practices into the commercial risks arena, which we know is being targeted by organised criminals. Whilst staged and induced motor accidents remain a priority for the Bureau going forward, we are also working with members and the wider industry to identify the next big potential benefit which could be derived from our unique, collaborative approach.”

Insurers in the eye of the storm

As the world assesses the damage caused by Hurricane Dean, Vicki Bakhshi, Associate Director in F&C's Governance and Sustainable Investment team, warns insurance companies need to put more effort into adapting their risk models to take into account these increasingly common extreme weather events. "The first major Atlantic hurricane of the season has highlighted, once again, how vulnerable we all are to extreme weather conditions. As well as the tragedy of human loss, Dean has caused big economic losses including extensive damage to property and the shutdown of businesses. It has also raised fresh concerns about the impact of hurricanes on the Gulf's oil industry," she explained.

Estimates indicate that insured losses from the hurricane are likely to range between $750m and $1.5bn. Although there is no evidence that individual hurricanes like Dean are a consequence of climate change, science tells us that warmer seas and warmer weather are likely to make hurricanes more intense. According to the Intergovernmental Panel on Climate Change (IPCC), tropical cyclones could become more severe with greater wind speeds and more intense rainfall. "Despite the change in climate conditions, the risk models used by insurers are almost entirely based on historical patterns, not on climate science, and they do not take into account this upward shift in the risks," argued Bakhshi. "This means insurers might be underpricing risk. And some may also be underestimating the amount of capital they need to survive the kind of mega-catastrophes that are more likely to occur as a result of climate change."

F&C has been researching how insurance companies are responding to climate change, and will be publishing a report soon. "The good news is that the sector is starting to wake up, and some risk models are now beginning to be amended. But the question is: which will change faster, the way the insurance sector operates or the weather?" added Bakhshi

School Fires

Figures from Zurich Municipal show that school fires cost the UK an estimated £74 million in 2006. This figure represents an increase (of £7million) when compared to figures released at the end of 2005. For comparison, in the USA, with five times as many schools as the UK, fire costs are only £50 million due to the extensive use of sprinkler systems. This comes as the Department for Education and Skills (DfES) consults on whether to make sprinklers mandatory in all new school buildings. A more thorough review of the case for sprinklers was identified after its Building Bulletin 100, "Designing and Managing Against the Risk of fire in Schools" document went to public consultation in 2006.

Zurich Municipal has been working with other partners, including the Fire Protection Association and the Fire Service, to press the Government to introduce sprinkler systems in all new schools. There is widespread support for the campaign, including a parliamentary motion backed by nearly 100 MPs With around 75 per cent of school fires being started deliberately, arson continues to be a serious issue for schools and fire services. The majority of arsonists are between 10 and 19 years of age, so tackling the grass roots problem of school fires involves educating school-aged children about the dangers of deliberate fire setting. Related costs incurred as a result of school fires have increased by £25 million over the last 11 years.

The financial costs are only part of the problem. The Arson Prevention Bureau (APB) estimates that almost a third of school fires occur during the day, putting the safety of pupils and staff at risk. Furthermore, fires interrupt learning and over 90,000 pupils a year will experience disruption to their education as a result of damage to classrooms or school property. This can range from an individual classroom being out of action for a matter of weeks to whole schools being taught in temporary accommodation for two to three years.

Larry Stokes, Underwriting Manager at Zurich Municipal and Chair of the Arson Prevention Bureau's Schools Working Group, comments: "Only fires that are allowed to grow cause the catastrophic damage that we see resulting from some school fires. Sprinklers are 99 per cent effective in limiting damages and in our experience, losses in buildings fitted with sprinklers are up to 90 per cent less than those in schools where no system was fitted." However, despite these facts only around 300 of the UK's 30,000 schools are fitted with sprinkler systems. Zurich Municipal has been working closely with local authorities to campaign that sprinklers are fitted in every newly built or refurbished school.

There are various myths associated with sprinklers that result in a reluctance to fit them in new buildings and refurbishments. The biggest objection is the initial cost. In actual fact this can be less than two per cent of the school building cost and that initial investment will save schools money in the event of a fire. But even in the ideal scenario where no fire occurs, sprinklers can save schools money through lower insurance premiums and by offsetting other building costs. Larry continues: "We are delighted that the Government is considering taking this vital step towards making sprinklers mandatory in schools. We have been working hard to achieve this for the last 10 years. The fact is that there has never been a death from fire in a building fitted with sprinklers."

A regional percentage breakdown for the cost of school fires in 2006 is as follows:

London/South East/East Anglia	15%
Midlands	39%
North/NE	5%
North West	6%
Scotland	15%
Wales/South West	20%

What Goes Round

Research from Halifax Home Insurance found that 61% of Brits unwittingly destroyed some £163 million pounds worth of currency in the washing machine last year. Men doused a staggering £95 million while women scrubbed out some £68 million. Britons also wrote off a further £251 million worth of mobile phones after accidentally placing them in the wash. They also drowned £13 million worth of mp3 players – and that’s not including the cost of replacing downloaded tracks. One in twenty Brits aged 16-64 (2.1 million) gave themselves a novel excuse for being late for work after spin cycling their travel card.

One-in-four (24%) Brits accidentally put metal hair grips through the wash in the last year. A further 17% of Brits put keys through the wash and 14% jewellery. One-in-ten (9%) of Britons destroyed cheques or letters and the same percentage accidentally washed children’s toys left in pockets.

Water damage

According to 42%, washing an inappropriate item caused their washing machine to leak and resulted in a massive £2.2 billion bill to fix the resulting water damage. Halifax Home Insurance estimates that each year washing machines damaged by inappropriate items leak enough water to meet the daily requirements of over 430,0005 households.

Regional findings

People living in the South East and East Anglia accidentally destroy the most money in washing machines each year, rendering over £51 million of currency worthless. Thrifty Scots are the best at checking their pockets with just £8.5 million put through the wash cycle each year.

Holiday Blues 1

According to Halifax Home Insurance, a fifth of all claims for accidental damage happen in July and August, when schools are out and the kids are about, getting into scrapes and mischief.

Halifax Home Insurance claims data shows a 23%* increase in summer for claims for accidents around the home, ranging from broken windows to spillages on carpets.

Glasgow is the number one hotspot for accidental damage claims.

Top ten hotspots for accidental damage claims:

Rank	Region	Average cost of claim
		for accidental damage
1	Glasgow	£564.73
2	Edinburgh	£495.40
3	Newcastle	£509.97
4	Merseyside	£651.53
5	Cardiff and West Valleys	£738.37
6	Leeds	£537.11
7	Aberdeen	£600.73
8	Bristol	£692.58
9	Guildford	£552.89
10	Wakefield & Huddersfield	£535.69

Holiday Blues 2

The summer holidays are here and millions of Brits are off on their holidays. This year, around two million will be taking to the road with a caravan in tow, accounting for nearly 20% of holidays taken in the UK.

But figures from insurer Towergate show that over a quarter (28%) of caravan owners won't bother to insure their caravans.

One in ten caravanners made a claim in the last three years and, of those, three quarters claimed for accidental damage and 13% for either theft of, or from, the caravan

Holiday Blues 3

The UK floods could cost insurers over 2 billion pounds ($4.12 billion) and might lead to the industry reconsidering the availability of flood cover claims a leading risk-modelling firm.

Torrential downpours that saw a month's rainfall in one day in July and left tens of thousands of people in central and western England either homeless, without power or running water, will be at least as costly as the floods that hit northern England in June, Risk Management Solutions (RMS) said. Although the number of properties affected by the current floods is lower than June's, higher average claims, a greater proportion of insured damage, together with higher business insurance claims due to loss of electricity and running water is likely to push the cost well above the 750 million pound bill that RMS estimates insurers will be left with after the June floods.

The extent of insured damage from the combined flooding in June and July is much less than if there had been a repeat of the devastating 1947 floods, which would cost insurers between 4.5 billion and 6 billion pounds, RMS said, but may make insurers look again at offering flood insurance on a widespread scale. "Premiums charged by insurers do not fully reflect the flood risk to which properties are exposed," said Robert Muir-Wood, chief research officer at RMS. "This summer's floods have exposed many shortcomings in flood risk management and the location of critical infrastructure like power stations and water treatment plants, which have been shown to be vulnerable."

Existing national flood risk maps, used by local councils and property developers are incomplete and do not contain the potential for flooding from poor drains and streams, it said. Credit rating agency Fitch calculates that the cost of the combined June and July floods might reach 3 billion pounds.

50,000 and rising - insurers pulling out all the stops to deal with flood claims

Insurers, says the ABI, are handling over 50,000 claims following the recent floods, as well as the earlier flooding in Yorkshire. Latest figures show that the July floods have so far resulted in 12,000 claims for flood damaged homes, and 3,500 claims from businesses. At this early stage the estimated insured cost is likely to reach £1 billion. This would push up the estimated combined cost for both flood incidents to £2.5 billion. Insurers continue to deal with over 27,500 household and 7,000 business claims following the Yorkshire floods.

Terror Cover

The availability of terror insurance has improved but there remains little cover for chemical, nuclear, biological and radiological risks Guy Carpenter & Company has published a new report on terrorism which provides a detailed overview of the state of terror insurance cover globally, highlighting recent developments in the US, Belgium, France and the Netherlands, as well as emerging issues in the aviation market. “With private insurers increasingly excluding terror coverage from their contracts, governments are becoming more involved in mitigating the risk exposure of insurance and reinsurance companies,” said Sean Mooney, chief economist at Guy Carpenter. Among the report’s other key areas of focus:

Availability and affordability of coverage: In the US, terrorism risk insurance has improved, becoming more affordable since the terrorist attacks of September 11, 2001. Despite increases in risk retentions under TRIA (the Terrorism Risk Insurance Act of 2002), insurers have allocated additional capacity to terrorism risk, prices have declined and take-up (purchase) rates have increased. These improvements have been driven by a number of factors, including better risk measurement/management, the improved modeling of terrorism risk, greater reinsurance capacity and a recovery in the financial health of property and casualty insurers;
Group life policies: Coverage for terrorism risk insurance in group life insurance policies has remained generally available, and prices have declined, even though group life insurance is not part of TRIA. Given these market signals, there is no reason to expect negative developments in the group life insurance market;
Chemical, nuclear, biological and radiological risks: There remains little cover for these risks. This has less to do with terrorism specifically than with the nature, scale and uncertainty of the damage and losses from these events;
New Belgian terror coverage programme: Belgium is expected to introduce a programme for terror cover in 2008, with an upper limit of €1bn;
Changes in France: In France, a number of adjustments were made to the GAREAT program, including the addition of €200m in capacity to the Large Risks Scheme, and the extension of the Unlimited State Guarantee to 2009;
The Netherlands: The number of participating companies in the Netherlands terror pool has decreased slightly, primarily as a result of mergers and takeovers; and
Aviation market developments: Losses to hulls, passengers and third parties arising from weapons of mass destruction (WMD) have emerged as a major issue, as debate continues about whether they should be classified as government or commercial market risks.

Business Continuity on Rocks?

Specialist back-up centres designed to provide business continuity resources in the wake of a terrorist incident may be worthless, warns Moore Stephens The insurance industry should be alarmed that specialist back-up centres designed to provide business continuity resources in the wake of the recent security alerts in the UK, may be worthless as a result of an over-concentration of demand, accountant and consultant Moore Stephens has insisted. Likening the possible scenario to the commercial and emotional havoc created in the case of over-selling of airline seats on package holidays, Simon Gallagher, head of the Moore Stephens Industry Group, said: “Experience has shown, particularly in the wake of the July 7 bombing attacks on London in 2005, that, in simple terms, there are just not enough seats available at some of these back-up centres.

“The UK insurance industry is under particular pressure to put in place effective, practical business continuity plans, not least because of the requirement on them to do so by the Financial Services Authority. And while the idea of independent organisations renting out recovery centres for an annual fee is a very good one, in some instances these centres have been put to the test and have failed.”

Jokes

Cila has heard from members handling the floods. One reports that on the first day of the floods a policyholder gave birth to a baby boy to be named 'Noah'. Probably better than being named after the entire Liverpool football team.

A conversation between a broker and policyholder:
Policyholder: "I've just opened my front door and a foot of water came into the house. What should I do?"
Broker: "Open the back door".

Other useful comments can be obtained from BIBA. One policyholder offered an appointment on a Sunday explained he would prefer to see us during the week so he could have a day off.

Brazen Health Fraud in the Gym

Several recent cases suggest that the government’s incapacity benefit is widely abused. In the last ten years the national bill for the Disability Living Allowance has gone from £4.4bn to £10bn. The number of claimants has risen from 1.9m to 2.85m. Typical of the recent cases was dance teacher John Dennis. He claimed after a dancing career his mobility was wrecked by arthritis. But when his condition improved he began teaching at dance schools and studios all over West Wales. He admitted receiving £8000 illegally and was sentenced to 200 hours community service. Another dance teacher Jay Sommers from Merseyside was given a suspended prison service after admitting to receiving £23000 in disability allowance while working as a dance teacher.

A bodybuilder won the Cornwall's Strongest Man title - while falsely claiming £43,000 disability benefit. Jon Stentiford, 35, pocketed taxpayers' cash while training for the contest in 2003, in which he lifted a Mini Metro car off the ground for more than a minute, dragged a lorry, held a 50lb weight at arm's length and ran around carrying heavy gas bottles over his head. The 6ft 4in muscleman, who competed under the name John Nicholls, also allegedly worked as a labourer and nightclub bouncer, a court heard yesterday. He admitted falsely claiming disability living allowance, income support and council tax benefit. Andrew Oldland, prosecuting, told Truro crown court: "He has several convictions for dishonesty from at least 10 years ago."

Superfit Paul Gargett prided himself on his karate, kick-boxing and press-ups prowess. He was so good that he became a gym instructor and spent up to 30 minutes at a time working out on a cross-trainer machine. But while the 55-year-old was pumping iron he was telling the state he was disabled, and claiming thousands of pounds in benefit.

The martial arts instructor became eligible for disability living allowance in 1992 on the grounds that he suffered from a back condition, was barely able to move and needed constant attention.

But in 2004 his condition improved and he failed to tell the Department for Work and Pensions.

In March 2004, he joined the Warsash Maritime Centre's gym and became a voluntary gym instructor in December, going on to provide martial arts classes in Muay Thai kick-boxing as a registered black belt.

However, in May 2005, following a tip-off from a member of the public, DWP investigators embarked on a surveillance operation. And on May 12 Gargett was seen walking from the Fareham Borough Council offices to the Job Centre unaided. He was arrested and interviewed.

Further inquiries revealed that Gargett went to the gym three times a week and the kick-boxing classes he ran were described as 'strenuous unarmed combat'.

Gargett even advertised his services on posters distributed at the gym and stuck up on advertising boards.

DWP investigators found out that Gargett had won a veterans' press-ups competition by completing more than 70 press-ups. He had also started training for an amateur weight-lifting contest.

Between March 10, 2004, and November 1, 2005, Gargett, of Serotine Close, Knowle, Fareham, claimed nearly £8,000 he wasn't entitled to because he had not told the department that his condition had improved.

Appearing at Portsmouth Crown Court using a stick to walk and a portable cushion to sit on, Gargett admitted misleading the DWP. He pleaded guilty to one count of failing to notify it of a change in circumstances.

He was given a 26-week prison sentence suspended for two years. Judge Ian Pearson also imposed a three-month curfew on Gargett, meaning he must remain in his home between 8pm and 8am.

Product Liability Costs

Supermarkets were forced to shell out £9 million to motorists for serving them fuel contaminated with silicon last year. Supermarket giant Tesco alone shelled out £8 million following over 17,000 claims that the fuel had caused extensive damage to their vehicles.

The petrol in question damaged thousands of vehicles, it has emerged. It was supplied mostly in the forecourts of south-east England.

"We are 90% of the way through. The outstanding ones are where we are waiting for paperwork from the claimants," a Tesco spokesman said adding they were still processing some claims.

Rival Asda will also pay damages to some 3,000 customers following the damage claims. Overall the amount being disbursed is just about £1.4 million.

Morrisons has revealed that it has settled some 94 percent of claims, but refused to reveal the amount involved. The contaminated fuel caused damage to the sensors which are responsible for regulating emissions. The repair bills could range anywhere between £200 to £1,000.

Insurance Growth

Strong growth in the UK financial services sector has continued, helped by the highest level of overseas demand in almost eight years, according to the latest quarterly Financial Services Survey published by the CBI and PricewaterhouseCoopersLLP. In the general Insurance sector business volumes grew at their fastest pace since March 2004, driven by a further acceleration in business with private individuals and overseas customers, with the latter rated as “above normal” to a record degree. Numbers employed also expanded very strongly, and are set to do so again. Profitability declined, however, as total and average costs saw large rises, though firms expect that better cost control next quarter will offset slower growth and deliver a small rise in profits.

Legal Note

Owners of a village green and the British Legion as organisers of a fete were not responsible for an accident two years after they filled a hole - Cole v Davis-Gilbert & ors 1.3.07

Ms Cole fractured her leg after stepping into a hole in part of a village green where a maypole had been erected. The Royal British Legion had arranged to fill in the hole after the maypole was removed with soil and stones and subsequently with a bung. It was thought most likely that children had removed the bung and some of the infill causing the recreated hole to become a hazard two years later.

Decision

• The Royal British Legion had not breached their duty of care as it appeared on the evidence that the hole only became exposed shortly before the accident.
• The true cause was the removal of the infill and it was not possible to establish that the accident was caused by any negligence on the part of the Royal British Legion.
• The owners of the village green and the Parish Council were not liable to Ms Cole.

Comment

This decision of the Court of Appeal reflects concern that traditional activities could be reduced or prevented if too high a standard of care is set by the Court.

INSURANCE FRAUD SEEN AS A SERIOUS CRIME BY THE PUBLIC, BUT ONE IN TEN STILL LIKELY TO COMMIT IT

Nearly one in ten adults (eight per cent), admit to making fraudulent insurance claims, according to a recent consumer survey by Experian®, the global information solutions company.

The UK insurance industry pays out around £54 million a day in general insurance claims. However, more than one fifth of the population (21 per cent) believes that everyone exaggerates when making an insurance claim.

The survey aimed to uncover consumer attitudes towards insurance fraud and has found that the majority of the population (91 per cent) firmly believes that insurance fraud is a serious offence, but only a relatively small proportion (14 per cent) would definitely report someone who had actually committed insurance fraud.

David Murby, Managing Director of Experian’s Insurance Services division, said: “The survey revealed that people are well aware of what constitutes insurance fraud and consider it a fairly serious crime, which is not victimless, but they see it as a crime against an organisation rather than an individual and, as a result, appear less likely to report it.

“In fact, there appears to be a deeply entrenched impression that insurance fraud is commonplace in the UK, but the desire to do anything about it is not strong. Despite two fifths of the population claiming to know someone who has committed insurance fraud, the public is not inclined to report fraudulent activities.

“Therefore, it becomes even more important for insurers to be the ones taking steps to protect themselves and their customers from fraudulent activities.

“In addition, it would appear that the insurance industry collectively needs to raise the awareness amongst consumers of the impact of these crimes and work together to change the attitude people have about insurance fraud.”

The survey also revealed that incidents of fraudulent insurance claims are not limited to certain socio demographics. The likelihood of an offence being committed can be found across all social groups, whether they fall under ‘Symbols of Success’ or ‘Municipal Dependency.’ [1]

Overall, there is a perception amongst the public that the cost of insurance is high and the benefits are rarely seen. Consumers feel that they want to get value for money from their insurers so many, when making a claim, are likely to exaggerate it in the belief that the chances of getting caught are minimal.

David Murby continued: “Fraud continues to be a major challenge facing the insurance industry, costing an estimated £1.5 billion a year. There is little doubt that insurance fraud is seen as serious and people are generally aware that it is not a crime without consequences. However, only a small proportion of the population (15 per cent) feels that efforts by the insurance industry to combat fraud are sufficient, whilst over half the population (51 per cent) stated that they did not know whether the industry does anything or not.

“Fraud is a relatively new specialist area in insurance companies, with fraud itself previously being viewed primarily as exaggerated claims. However, insurance fraud is evolving, and there has been a significant upsurge in organised fraudulent activity with complex fraud rings, new types fraud, such as ‘slam-ons’ and staged accidents, contributing to higher premiums and greater pressures on the insurer-customer relationship.

“Insurers need to learn from one another as well as other industries that have adopted advanced processes to help them combat fraud. They need to ensure that they have in place effective processes that highlight inconsistencies and confirm facts. Experian’s anti-fraud solutions, for example, help insurers identify false, exaggerated, multiple and staged claims, non-disclosure, and false or stolen identities. Insurers need to be able to detect and avoid fraudulent activity at every stage of the insurance lifecycle.

“In addition to this, the onus is on the insurance industry to communicate with their customers and make them more aware of the effects of such a crime and what checks are in place that may deter the more opportunistic fraudster.”

Doing the Business

The latest findings from the AXA Business Crime Index show a 20% increase in the number of crime related insurance claims made by companies in 2006, compared with the 2005’s figures. Business crime claims increased by 6% in the last quarter of 2006 compared with the previous three month period. The Index, which is based on AXA’s own data, also reveals that over the same period the number of claims for violent and forced entries more than doubled, while arson claims soared by a fifth (20%). However, incidences of malicious damage including vandalism and graffiti; fell by 2% over the last quarter of 2006. Arson is an increasingly expensive problem for businesses; based on the amount paid out to victims it accounted for over half (51%) of all claims made.

Violent and forced entry claims in the last quarter of 2006 increased exponentially, more than doubling compared to the previous three months. AXA is warning businesses to urgently review their security provision given this sudden and dramatic increase. The average claim settlement amount for a case of violent or forcible entry was approximately £3,975, but the cost is far higher in terms of the traumatic psychological impact on employees, managers and business owners.

Plant Theft Down for the First Time in 12 Years

Plant theft is down for the first time in 12 years, according to a new report by The National Plant and Equipment Register (TER).

In its 2007 Equipment Theft Report, TER reveals that plant theft has fallen by 18% over the last year. The report shows:

More than 3,500 higher value equipment items were stolen in 2006 with a total value in excess of £31M; this compares with 4,324 items worth £43M reported as stolen to TER in 2005 when plant theft was at a record high
Excavators remain the highest value category of stolen equipment: in 2006, 793 were reported as stolen to TER, representing 22.3% of total reported thefts and valued at £11.8M or 37.5% of the total value of stolen plant. Particularly startling is the fact that reported excavator theft dropped by a staggering 32% between 2005 and 2006
The south-east of England , led by Surrey, then London and Kent , continues to top the league for the most targeted area for excavator theft
Trailers are the most commonly stolen item of equipment, representing 25.5% of UK theft; however trailer theft is down 17% on 2005 to 903 trailers and now accounts for 6.1% (£1.9M) of the total value of plant and equipment theft in 2006
After trailers, the most commonly stolen items of equipment are excavators (22.3%), quad bikes (7.4%), dumpers( 6.6%), rollers (5.6%) and breakers (4.4%); the top six types of stolen equipment account for 72% of thefts
Telescopic handlers remain a high value target for thieves, despite the number of thefts dropping 32% to 105. Theft of telehandlers represents 3% of total theft and 8% of total value (£2.5M)
There have been significant drops in the number of reported thefts from 2005-2006; compressors -48%, generators -44% and excavators, telescopic handlers, dumpers and fork lift trucks all down -32%
Tractor theft, having risen 70% in the last report, has remained static as has roller theft, while the theft of quad bikes has risen 5% to 261, representing 7.4% of total reported thefts; 20% of these quad bike thefts were from North Yorkshire alone
Equipment theft is most dense in the south of England – Surrey, London , Thames Valley , Kent and Essex – and least dense in Scotland
There are also equipment theft hotspots in northern England, in West Yorkshire, Greater Manchester, Lancashire and North and South Yorkshire
The most valuable item stolen in 2006 was a £300,000 Volvo 25 tonne road rail lorry
The most stolen equipment by manufacturer was Ifor Williams (733 thefts), followed by JCB (317 thefts) then Benford (192 thefts)
The top five police forces experiencing equipment theft are: Metropolitan (175 thefts), Surrey (173 thefts), Thames Valley (161 thefts), Kent (133 thefts) and Lancashire (120 thefts)
The police forces with the lowest level of recorded equipment theft were Cleveland , City of London , Northern, Fife and Dumfries & Galloway
The recovery rate for stolen plant and equipment is less than 5%. 95% of equipment stolen every year is not recovered
TER currently has 550,000 items valued at £2.6BN on its database: since 2000 more than £216M of stolen equipment has been reported to TER

DIY claims go through the roof over Easter

With Easter around the corner, many Brits will be arming themselves with hammers, drills and paintbrushes for the year’s first major DIY onslaught. However, research from Churchill Home Insurance proves they might do better to get the pros in instead, as DIY claims double during the Easter holiday.

Britons spend a total of £11 billion a year, or £257 per head, on DIY, with some spending up to as much as £1800. With that amount of spend as well as potential damage to the home, there is plenty of scope for costly DIY disasters. Churchill’s home insurance database of around 10,000 accidental damage claims shows the average DIY-related home claim at £401.40.

According to this research, Easter Monday is the worst day for DIY disasters, closely followed by Easter Sunday. Good Friday is the quietest day over the period for claims.

Churchill’s Home Insurance spokesman, Greg Dawson said: “There is a very clear trend with DIY related home claims. They tend to rise over national holidays, where homeowners begin to get creative. Claims tend to be lower on the first day of the holidays as it is often the purchasing day. The claims often follow the next day when the purchases are erected or installed.”

The insurance company has compiled a ‘DIY Disaster’ list which breaks down the types of DIY claim made over the Easter period:

Painting / decorating (72%)
Drilling / hammering / putting up shelves (14%)
Ladder related accidents (8%)
Tiling (3%) – broken tiles, tiles cracking bathroom suites
Glue / adhesive (1.25%)
Other – saws, chisels, etc

Some of the worst DIY disasters Churchill has paid out for include:

A policyholder who was installing a wooden floor and nailed through a pipe, causing £1583.09 damage
An excitable two year old helper who put a hammer through a TV screen, causing £1398.82 damage
A policyholder who damaged a sewage pipe while trying to remove concrete steps, resulting in a claim for £744.17
A policyholder who fell off a ladder and onto his dining room table, resulting in a claim for £339.99

Animal Tales

Bizarre animal antics topped the more unusual insurance claims at Norwich Union.

From swarms of bees and fighting bulls, to dogs with a penchant for false teeth – these were just some of the incidents over the last year involving our four-legged friends which landed homeowners and motorists in a spot of bother.

The insurer has compiled a list of the top ten most bizarre claims received in the past 12 months:

“I parked in a country lane beside a hedge, when I returned to the vehicle, two horses had chewed my car”
“A deer dived through my closed kitchen window.” (the deer survived)
“My young granddaughter accidentally fed my false teeth to the dog who promptly chewed them to shreds before I could retrieve them.”
“I was taking my hamster to the vet only to realise that when I arrived there, it had chewed through my handbag and escaped.”
“A deer headbutted the windscreen of my car, after being enticed by the yellow tax disc”
“My sandal was chewed by a fox at a friend’s barbeque”
“Three bulls escaped from the farm next door and ended up fighting in our garden, destroying the garden fence and trellis in the process.”
“A swarm of bees flew down my chimney causing clouds of soot to fly all over the living room”
“A sheep jumped into me on the farm, causing my glasses to break.”
“We think Big Bird must have flown into our patio door causing it to smash!”

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