Falsified sickness claims are on the rise in the travel industry. Sarah Hill examines the implications for insurers and tour operators
The travel industry is facing a number of challenges, with the Brexit vote and a constant threat of terrorism giving senior executives plenty to worry about.
Regardless of these issues consumer appetite for travel remains strong. Recent research from travel management company Travel Counsellors found that just 6% of consumers are less likely to book a holiday this year than last.
However, if the industry focuses purely on macro trends then low level problems can begin to flourish. There is no better example of this than what we are seeing with fraudulent sickness claims.
Rogue claims management companies (CMCs) have identified this as fertile ground from which to anchor their next scheme. The premise is simple: put in a claim against your tour operator or hotel for sickness contracted while on an all-inclusive holiday.
Through our work advising tour operators, we recognised this to be an exponential growth area for fraud and if left unchecked, could do significant damage to the industry. The immediate impact will be higher costs for consumers but if not addressed, it is even possible it could put travel companies out of business -- both big and small.
This specific type of claim used to make up a small proportion overall. But the Association of British Travel Agents (ABTA) spoke late last year of the "alarming" rise in gastric illness compensation claims made through UK CMCs.
To get a better understanding of this phenomenon, we commissioned YouGov to survey 2,000 consumers about their attitudes and experiences of this issue.
One of our key findings was that 46% of consumers believe it is acceptable to make a claim for food poisoning, even if they were not certain the illness was the hotel's fault. Clearly, there is still a misconception that fraud is a victimless crime -- even though the Association of British Insurers estimates that fraud adds, on average, an extra £50 to the annual insurance bill for every UK policyholder.
It has become clear that CMCs are targeting consumers who may be more vulnerable to fraudulent activity. While only 5% have received an unsolicited phone call regarding a claim, this rises to 11% of those currently unemployed and 17% of those with three or more children.
The targeting even spreads across borders, with 5% of all-inclusive holidaygoers actually having experience of being accosted while abroad regarding a claim. This again rises to 15% for those with two or more children.
There is no doubting that this issue is real, and it is only getting worse. What is needed now are practical solutions that can help curb the growth and bring fraudulent and exaggerated claims back to a manageable level.
We can learn from reforms to whiplash claims in the UK and a cut in referral fees or allowing certain claims to be processed through the Claims Portal would be a positive first step.
We are working closely with the Ministry of Justice, the Solicitors Regulatory Authority and ABTA to develop a solution that works for all concerned.
WHAT THIS MEANS FOR YOU
Rogue CMCs regularly paying between £500 and £2,000 in fraudulent travel insurance sickness claims, and numbers are growing. Uncapped legal fees make for a lucrative market, with 46% of consumers believing it's acceptable.
CMCs targeting potential claimants via unsolicited phonecalls and by direct approach to holidaymakers while still abroad about a potential claim, and providing information on how to proceed once back in the UK.
Calls for government and regulators to look at this new data and put processes in place to deter CMCs, including cuts to referral fees or a portal approach much like the recent reforms to whiplash claims.
Sarah Hill is head of fraud at BLM