iPhone blamed for sharp rise in bogus mobile insurance claims

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Insurance giant CPP says iPhone, BlackBerrys and HTC devices responsible for fake mobile insurance claims trebling

Fraudulent mobile insurance claims trebled in the past three years, and the flood of new claims centred on iPhones, followed by BlackBerrys and HTC devices.

So said insurers who run schemes for most of the UK’s major mobile operators and high-street banks.

The increasing desirability of smartphones, longer contracts and the tough economic environment fuelled the rapid increase in fake claims, said insurers CPP Group and Lifestyle Services Group.

The insurers also said bogus insurance claims peaked following the release of desirable new handsets.

CPP said there had been a four per cent rise in total claims for the iPhone 4 following the launch of the iPhone 4S, which it said were likely fraudulent.

CPP head of fraud Raphael Lawson said fraudulent claims relating to the iPhone were much more common in general. Insurers regularly have to pay out for these claims as they cannot get replacement stock.

CPP said around 59 per cent of all fraudulent claims it detected were for iPhones, with BlackBerrys accounting for around 25 per cent.

Figures

Lifestyle Services, which runs schemes for Vodafone, Three, Orange, Lloyds TSB, Halifax, Co-operative Bank, Barclays and Phones 4U, receives around 700,000 mobile phone insurance claims each year.

It says the number of dishonest ones has increased from between one and two per cent three years ago to more than five per cent now.

CPP also runs insurance schemes for major mobile operators and banks. It said the number of dishonest claims it has received has trebled in two years.

CPP identified 611 fraudulent claims last December. This compares with 332 in the same month a year ago and 177 two years ago. It estimates 10 per cent of all claims are now dishonest.

Lawson, who also chairs the Telecommunications Insurance Fraud Working Group, said all mobile phone insurers were experiencing a rise in fraudulent claims.

Causes

Lifestyle Services head of risk audit and compliance Tony Hurl-Hodges said: “Networks have now moved on to 18- or 24-month contracts. People don’t want to wait 24 months for the latest device.”

Detective chief inspector Martin Ford, the head of the National Mobile Phone Crime Unit, said an increase in the number of dishonest claims was likely to be down to improvements in the detection of fraud.

More false claims are being detected because insurers can now match up claimed handsets with those sent to recycling firms, he said.

Lifestyle Services and CPP agree that improvements in information sharing, including arrangements to communicate with mobile recyclers, had helped increase detection rates but said the incidences of fraud were on the rise.

“We have had to become a lot smarter in what we do, but there has certainly been an exponential rise in fraudulent claims,” Hurl-Hodges said.

Lawson said CPP’s I2 software, originally developed to help the military to identify terrorists, has uncovered the increase in detected fraud cases.

But since the introduction of the system, the number of fraudulent claims continued to rise despite no significant changes to the processes the firm uses to detect fraudulent claims.

There have been more cases where a claimant has deliberately damaged a handset beyond repair to ensure it is replaced.

In one incident, a woman claimed her device had smashed on a kitchen floor. Forensic examination showed damage was caused by something resembling a small pickaxe.

Lawson and Hurl-Hodges said they want to see more information sharing between insurers, mobile network operators and other firms involved in insuring mobile devices to aid the fight against fraud.

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