Fraudulent mobile phone insurance claims will account for 30% of all mobile phone claims by 2015, insurance firm Lifestyle Services Group (LSG) warned this week.
LSG said fraudulent claims now comprise between 15-20% of all mobile phone claims, rising sharply from just 5% in 2007. The company, which is owned by Phones 4u and supplies around 60% of the mobile phone insurance market, dealt with approximately 700,000 mobile phone claims last year.
LSG claimed the rise in fraud was largely driven by increasing smartphone sales, which are also pushing up the average cost of mobile phone insurance claims by around 20%. Phones 4u recently said the rising cost of smartphone claims at LSG in 2011 had slowed the group’s growth.
LSG also revealed that the percentage of smartphone claims has more than doubled in two years, rising from 40% in 2010 to 70% last year. It is expected to account for 95% of all claims in 2012. The rate of claims is also on the rise, with the number of claims made in the first six months of 2012 up 10% compared with the first half of 2011.
In a bid to cut fraudulent claims, LSG runs a fraud investigations team supported by a team of analysts. It works closely with LSG’s network and retail partners to put together cases of fraud in evidential packs, which it then passes onto the police.
Speaking to Mobile, LSG head of security and investigations Peter Clancy said: ‘We understand the police are exceptionally busy so we work with our partners in order to present these cases on a plate… On the basis of the evidential packs that we present to the police, over 80 arrests for fraudulent mobile phone claims have already been made in the first six months of 2012.’
Over 95% of fraud cases the investigations team presents to the police result in arrests. Clancy said there are three main sources of fraudulent claims. These include consumers exaggerating damage to their handsets, false claims from those wanting to upgrade to the latest smartphone and claims from organised fraud rings.
Claims increase noticeably before iPhone launches, with LSG witnessing a 300% rise in claims before the launch of the iPhone 4S last year.
LSG’s frontline staff are trained to detect suspicious claims and refer them to the investigations team. The company also uses fraud gateway software to detect around 13,000 high risk policies each month, which are then flagged for further investigation. LSG shares data with other insurance companies to detect patterns of insurance fraud.
LSG monitors recycled phones in partnership with eight major recycling companies. This has resulted in the identification of over 12,000 recycled handsets that were the subject of false claims. It also monitors social networking sites to identify where handsets have been passed on by fraudulent claimants to family or friends.