DWF Law have highlighted a ‘huge’ growth in property fraud they say is unfortunately ‘non-stop.’ The global legal provider has said that property fraud concerning commercial and domestic properties is on the rise exponentially, with ‘cannabis farms a big issue’.
Paul Holmes, partner at the global law firm, says he has employed one special investigator in the past 7 months and is considering hiring another to keep on top of these growing fraud cases. Here’s what he explains is going on:
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Cannabis farms
There has been a new incarnation in
claims when it comes to unlawful cannabis farm discoveries by absent owners of domestic properties, or untenanted pubs or restaurants. This new development is that property owners and growers are now in cahoots together, rather than the property owner professing surprise when a cannabis farm, secretly run by tenants, is discovered on their property. The owner is in on the operation from the start, but when the farm is eventually busted, the property owner puts in a malicious damage claim under their commercial or domestic
household insurance policy. Sometimes, this will be an escape of water claim, due to the irrigation systems needed for the farming. If the claim is successful, the owner is free to renovate the property, put it up for rent once more and the start the process all over again. ‘It is a massive problem,’ Paul Holmes of DWF Law admits.
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Claims farming is when a claimant is contacted by an unscrupulous company and encouraged to make a claim, and loss assessors seem to be increasingly turning their hands to it via social media. It’s similar to accident management companies in the automative world chasing claims, a practice that has become less prevalent following the
Official Injury Claim portal of 2021 (the portal resulted in lower compensation amounts and means the injury
motor fraud ‘business’ is no longer so lucrative). The claims farmers get paid for inflating the damage of a claim and then skim money off the top. Some companies reportedly have a baseline of a 40% skim.
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Fake claims from lying policyholders
Recently,
Aviva has recorded a 26% rise in the proportion of home insurance claims rejected for fraud and these are seemingly most prevalent when it comes to escape of water (‘wet arson’ is becoming another term for it). Owners can do a substantial amount of damage to their own properties when it comes to water, and not risk criminal prosecution or a jail sentence, like they would for arson. If caught, they receive a slap on the wrist only.
Indicators of such fake
claims can be water damage in improbable locations, unusual water staining, ceilings coming down in unlikely or dry places and signs of mechanical damage.
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Policy inception fraud
This is when somebody lies on the application form when applying for an insurance policy; for example, about whether they have a criminal record. It could also mean taking out a policy after damage has already happened to the
property, so the owner can claim quickly. Or taking out policies with numerous insurers and making consecutive claims i.e. if a 6 figure subsidence claim is rejected, the owner takes out a new policy with a different insurer and pretends the damage has just happened.
Another ruse is exploiting policy exclusions. An owner may have a genuine escape of water
claim, but the policy may specify that the property has to be occupied at the time of the incident (many insurers won’t pay the claim if the property was unoccupied for 30 to 40 days); the owner will fraudulently say it was. And AI is also being used to doctor photographs used in a claim.
Property fraud is a worrying trend and an increasingly pressing issue in the UK, affecting insurers, policyholders and the broader economy.
Fraudulent claims undermine the system's integrity and lead to higher premiums for all policyholders.
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