The claims landscape continues to evolve at pace as insurers face a variety of challenges, from rapid advances in technology, increased levels of fraud and major weather events. Griffiths & Armour’s Claims Division Director, Andrew Taylor, discusses some of the key issues that could have a potential impact on your business.
Climate change and weather-related events
We are seeing more weather-related events as the climate changes, such as longer heavier rainfall leading to rivers bursting their banks and drainage systems being overwhelmed, causing considerable damage in urban areas and the force of recent storms has led to an increasing number of claims against insurers for material damage and business interruption. It’s not just storms and rain that can lead to claims, as warmer summers have led to drying out of land, causing damage to the foundations of buildings. The Association of British Insurers are on record as saying that ‘in total, the industry paid out £4.86 billion to homeowners and businesses in 2023. More than half of this figure – £2.55 billion – was for home insurance claims. This is a near 10% increase on 2022 totals (£2.33bn) and has been driven by weather-related damage’.
Cyber attacks
An increase not only in frequency, but severity has been seen by insurers, with many criminal gangs using increasingly advanced techniques to access systems. This trend is set to continue as digitalisation creates a broader landscape and more opportunities for the gangs involved, by targeting supply chains to access larger networks, larger scale ransomware attacks and exposing vulnerabilities in systems used to work remotely. The threat of a systemic event that could have national or even global consequences remains a real possibility. The Government’s cyber security survey for 2024 states half of businesses (50%) and around a third of charities (32%) report having experienced some form of cyber security breach or attack in the last 12 months. This is much higher for medium businesses (70%), large businesses (74%) and high-income charities with £500,000 or more in annual income (66%). By far the most common type of breach or attack is phishing (84% of businesses and 83% of charities) followed, to a much lesser extent, by others impersonating organisations in emails or online (35% of businesses and 37% of charities) and then viruses or other malware (17% of businesses and 14% of charities).
AI related fraud
Insurers are seeing a worrying new trend that involves the use of technology to alter/modify images to give the impression of damage. Known as ‘shallowfake’, claims technology can be used to show damage to a building or motor vehicle allowing gangs to make fake claims against insurers for damage that never occurred, using paperwork from garages/builders that are part of the scheme or by falsifying paperwork from legitimate contractors. In the past gangs would need to arrange cash for crash scenarios however, with technology and false paperwork, this can all be done remotely. Some gangs have gone as far as locating written off vehicles and altering the registration number on the image to show the registration of the vehicle they have insured to con thousands of pounds from insurers. LV advised they had seen an astonishing 300% rise in such claims in 2023.
Continued rise in claims inflation
Claims inflation has risen rapidly in recent years and shows no sign of slowing. Inflation in general has seen the costs of goods and services rise and this, along with supply chain disruption, development of technology on vehicles and the provision of support to individuals after serious accidents, has meant claims are more costly to deal with on the whole.
Car Cannibalism
Car cannibalism is a growing phenomenon in the UK, where vehicles are targeted and have parts stolen from them, often in public car parks at lightning speed. Demand for car parts was badly affected by the pandemic, with cost increases and reduced availability meaning the market for stolen goods and increasing numbers of chop shops being the only alternative for some people.
Potholes
With changes in the weather, longer, wetter winters, and an increased number of vehicles, many roads now have more potholes than ever before. In a recent survey the AA advised pothole damage cost drivers £579m in repairs last year, not to mention the cost to businesses and individuals of vehicles being off the road while being repaired.
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