Watch out for fraud
Mortgage fraud rates have remained fairly steady at 20 frauds in every 10,000 applications since early-2008, rising in line with new applications according to Experian. Experian’s fraud experts believe that mortgage providers will see fraud rates increase in 2010 due to the continued shortage of sub-prime and self-certification mortgages and increasing demands to remortgage emanating from the last batch of pre-crunch mortgage holders coming off three-year fixed-term interest deals. Fraud losses in the mortgage sector could reach £1.2 billion in 2010 according to Experian.
Experian’s report shows that insurance fraud rates almost doubled in the final quarter of 2009, from nine detected frauds in every 10,000 applications in quarter three, to 16 in quarter four. Insurance fraud rises in difficult economic times as financially stressed consumers increasingly claim on home insurance to gain goods which they can no longer afford to replace. With uncertainties over the economy likely to result in unemployment remaining higher for longer, Experian estimates that general insurance fraud losses could reach £2.5 billion during 2010.
Nick Mothershaw, director of fraud and identity solutions at Experian, commented: “Attempted fraud is on the increase and the nature of the threat is changing. Organised criminal fraudsters are moving into the mass-market, looking beyond those with obvious wealth towards lower-value but more vulnerable targets. At the same time, financial stress brought about by the recession is driving increasing numbers of people to commit fraud to maintain their lifestyles.
“As a result, financial institutions could be faced with sustained fraud attacks during 2010. The volume and intensity of attempts will continue to grow and organisations must be prepared to ensure that they can most effectively manage the risk this exposes them too.
“Our report shows that fraud threat is continually evolving and the associated losses have a direct impact on profitability. Consumers can help protect themselves against the devastating effects of identity fraud by monitoring their credit reports. Financial institutions need to take a more holistic approach to fraud, including sharing fraud data with other firms and ensuring that robust controls are in place across the business.”