Insurance fraud

Category: Fraud and financial crime · Reviewed by the Apex broking team · Last reviewed 2026-08-22 · ~4 min read

Definition

Insurance fraud is dishonest conduct intended to obtain a benefit from an insurance contract that would not otherwise be due. It is usually grouped into two families. Application fraud (sometimes called policy fraud) is dishonesty at inception or renewal — concealing a claims history, misdescribing a trade, understating a fleet’s use, or fronting a policy in someone else’s name. Claims fraud is dishonesty once a loss is being presented — inventing a loss that never happened, inflating a genuine one, or supporting a genuine claim with fabricated documents. A separate category, organised fraud, involves networks that target several insurers, brokers or intermediaries at the same time, often across motor, liability and property.

The statutory remedy for a fraudulent claim

Section 12 of the Insurance Act 2015 sets out what happens when an insured makes a fraudulent claim. The insurer “is not liable to pay the claim”, “may recover from the insured any sums paid by the insurer to the insured in respect of the claim”, and “in addition, the insurer may by notice to the insured treat the contract as having been terminated with effect from the time of the fraudulent act”. If the insurer does terminate, section 12(2) allows it to refuse all liability for events occurring after the fraudulent act, and it need not return any premium. Crucially, cover for genuine losses that occurred before the fraudulent act is not retrospectively removed. The Act also addresses group policies, so that one member’s fraud does not automatically destroy cover for innocent members.

Fraud is also a criminal offence

Dishonest conduct of this kind can be prosecuted under the Fraud Act 2006 — typically fraud by false representation or fraud by failing to disclose information. Prosecution and civil policy remedies are independent: an insurer can decline a claim and seek repayment whether or not there is a prosecution, and a prosecution can follow whether or not the claim was paid.

The bodies involved, and how they differ

Three organisations are routinely confused. The Insurance Fraud Bureau (IFB) is an industry body, established in 2006, focused on the detection and prevention of organised insurance fraud; it provides intelligence to insurers and supports police investigations. The Insurance Fraud Enforcement Department (IFED) is a police unit — “a bespoke unit within the City of London Police dedicated to combatting insurance fraud”, with a national remit across England and Wales, funded by the insurance industry via the Association of British Insurers. The Insurance Fraud Register (IFR) is a database of known insurance fraudsters, “managed and administered by the Insurance Fraud Bureau on behalf of the ABI”. In short: the IFB is an intelligence body, IFED is a police force unit, and the IFR is a record. They are separate things with separate governance.

What it means for a commercial buyer

Two practical points dominate. The first is presentation: an inflated claim can cost a business a claim it would otherwise have been paid, plus the policy, plus its ability to buy cover afterwards. Supporting a genuine loss with a document that has been “tidied up” is treated as fraud, not as housekeeping. The second is exposure to fraud committed against the business — by employees, by suppliers or by outsiders. That exposure is not covered by a liability policy; it belongs in commercial crime insurance and, where systems are involved, in computer fraud cover or funds transfer fraud cover.

Detection and its consequences

Insurers screen at application, at renewal and at claim, increasingly with automated tools — see AI fraud detection. A referral does not mean an allegation has been made out, and an insured facing one should expect to answer questions, produce documents and, where the sums are material, take its own advice. Where a fraud finding is made, a listing on the Insurance Fraud Register may follow, with consequences for the availability of cover for years afterwards.

Why it matters

The consequences of a fraud finding are disproportionate to the amount in dispute. A modest exaggeration on a claim can forfeit the whole claim, end the policy from the date of the act, and make future cover materially harder to place. For a commercial buyer the discipline is simple: present the loss you actually had, keep the underlying records, and tell your broker straight away if you realise something in a submission was wrong.

Frequently asked questions

Does an exaggerated claim invalidate the whole policy?

Under section 12 of the Insurance Act 2015 the insurer is not liable to pay the fraudulent claim at all, may recover sums already paid for it, and may terminate the contract from the time of the fraudulent act. Genuine losses that occurred before that act are not affected.

Are the IFB, IFED and the Insurance Fraud Register the same thing?

No. The Insurance Fraud Bureau is an industry intelligence body founded in 2006; IFED is a specialist unit within the City of London Police funded by the industry through the ABI; and the Insurance Fraud Register is a database of known fraudsters administered by the IFB on behalf of the ABI.

Does my liability policy cover fraud committed against my business?

Generally not. Liability cover responds to your legal liability to others. Theft or dishonesty by employees or third parties belongs in commercial crime cover, with electronic and payment-diversion losses depending on the specific crime and cyber wordings.

Related entries

• Insurance Fraud Register
• Conveyancing fraud
• Commercial crime insurance
• AI fraud detection
• Commercial insurance UK

This entry is part of the Apex Insurance Wiki. Last reviewed 2026-08-22. Next review: 2027-02-22. It is general insurance information, not legal advice, and it describes UK market practice and law as at August 2026.

Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority (FRN 724952). This page is general information, not advice on a specific policy.