UK crime gang jailed for defrauding insurers out of £1m

Published in: Risk, Risk management, Conduct risk, Corporate strategy, UK, People

Companies: Zurich, Royal Sun Alliance, Ageas, Allianz, London Victoria,

Zurich’s fraud team helped police take down a North London crime gang that targeted 14 insurers over four years in a £1m ($1.3m) commercial property scam.

Police said the five-man gang made fraudulent claims of property damage and loss of earnings at various bars and restaurants across England.

Following an investigation by the City of London Police’s Insurance Fraud Enforcement Department (IFED), the men were sentenced yesterday to a collective 14 years in prison for a mix of conspiracy to defraud and money laundering offences. Steps to recover any illegal benefits are also under way.

IFED first became aware of the fraudulent activity after a referral from Zurich.

They were suspicious of a claim they received for property damage and business interruption at a wine bar in Sleaford, Lincolnshire, caused by a burst water pipe. 

Fraud investigators at Zurich established the wine bar did not hold an alcohol licence and was not open for trade prior to the claim. They then referred it onto IFED to investigate. 

How the fraud was carried out

Between December 2012 and April 2016 the gang identified four bars and one restaurant across England, and one by one, they used them to facilitate their fraud.

After leasing each of the properties using a shell company, they proceeded to incept a total of 26 commercial property policies, each with a different insurer, and then make a fraudulent claim on each policy. 

Each of the claims were for the same issue, caused deliberately by the gang, an escape of water from a burst pipe leading to significant damage to the property and subsequent loss of earnings, while the premises stopped trading.

A loss adjuster would then attend the premises to check the validity of the claim. In reality, police said the venues were never open for trade.

False leases and documents were supplied to loss adjustors by the gang to portray that a legitimate business was in operation over a two-year period prior to the claim.

In total, the police said 15 of the policies were subject to successful claims and £944,206 was paid out.

This money was then laundered through various bank accounts held by members of the gang, and eventually withdrawn in cash. 

Attempts to avoid detection

Before making each claim, the gang checked with the insurer to find out which loss adjuster they used. This was done to avoid them from attending the same premises twice.

In instances where the same loss adjuster was due to visit, the men withdrew their claim, stating the landlord of the premises was liable for the losses and would cover the costs.

To further avoid detection, they chose a different geographical location for each premises to reduce the chance of having the same loss adjustor visit.

The group also attempted to distance themselves from the fraud by changing their names by deed poll.

Scott Clayton, head of claims fraud at Zurich, said it was a very complex case due to the scale of fraud and the level of detail to which these fraudsters organised their operation.

According to Zurich, the insurers involved in the case include:

Zurich; London Victoria; Royal Sun Alliance; Ageas; Allianz; Midlands Insurance; Endsleigh; W.R. Berkley; APC Underwriting; JRP Underwriting Limited, DTW1991, New India Assurance UK; UK General Insurance; Westminster Insurance; Towergate Insurance; and ERIC Insurance.

 

Ronan McCaughey