Claims Management Companies (CMCs) are entering drainage-related insurance claims on behalf of unwitting members of the public
A new investigation by Direct Line Home Insurance has found members of the public are being targeted by Claims Management Companies (CMCs), who are making claims on their behalf. It is estimated that each year, almost £2 million of inflated and fraudulent claims for drainage-related issues are being made against insurance companies by CMCs. In cases investigated by Direct Line’s Counter Fraud Operations unit, over half (54 per cent) of all the total costs claimed by CMCs were found to be invalid, inflated or fraudulent.
A CMC in England and Wales offers claims management services to the public, usually promising to make the process easier with financial services companies. In the drainage cases investigated, customers are contacting their home emergency provider or a plumbing specialist directly when they have problems with their drainage. A plumbing specialist usually attends to carry out initial works, advising customers that further works are required and are providing householders with a mandate to sign. This mandate is passed to a CMC who submits an insurance claim on behalf of the policyholder. Extensive investigations have revealed fraudulent activity, where these claims are regularly significantly exaggerated both in scope of works and the cost.
Expert analysis by loss adjusters of drainage cases where the homeowner had home emergency protection reveals that much of the work claimed for on the home insurance policies could have been dealt with under the terms of the home emergency cover. This raises the prospect that CMCs are ‘double-dipping’ and claiming on both policies for the same work.
More than 11,000 insurance claims for drainage-related problems are made annually, an average of 32 per day, making this is a significant issue. Indeed, 2017 has seen a sharp rise in claims for broken drains, with over 3,000 notifications in the first quarter of the year, a 22 per cent increase on the numbers for the first quarter of 2016.
Any person with a drainage issue where they feel they may need to contact their insurer are urged to contact them in the first instance to ensure they are covered and the repairs and claims process is handled correctly. People with concerns regarding the conduct of a CMC can contact the Claims Management Regulator, a division of the Ministry of Justice, which reviews the conduct and practices of firms in the sector.
Katie Lomas, director of Direct Line Home Insurance, commented: “We work diligently to protect and promote the interests of consumers. It is important that vulnerable customers who have an issue with their property are not taken advantage of by companies that are looking to profit from their misfortune. Fraudulent and inflated claims drive up the cost of policies for all consumers. Anyone that thinks they may need to make a claim on their insurance policy should contact their provider directly. This will maximise the chance of the repairs being completed as quickly as possible and the policyholder not paying funds to an unnecessary third party.”
Members of the public with drainage issues are being targeted by CMCs who are demanding they are paid upfront for processing an insurance claim, with the firm then trying to claim this back from the individual’s insurance provider. People who have engaged a CMC and who have then decided not to proceed with a claim report being invoiced for 10 per cent of the total insurance claims cost plus VAT, which can run into thousands of pounds. Interviews with customers reveal that some of them are not even aware a claim has been submitted on their insurance policy by a CMC and do not understand the implications of the mandates they are being given to sign.
Many CMCs have been found to be regularly changing their name once they have been exposed as a disreputable operator with the same owners and management team.
Case file - Dorchester – Upstairs toilet blocked
The policyholder of a leading insurance company had an issue with an upstairs toilet blocking so contacted their home emergency provider who sent round a drainage company to investigate. The plumber fixed the problem, but also advised roots needed to be cleared from external pipes to prevent further problems. The plumber advised the policyholder to sign a mandate so the problem could be resolved through liaison with the home insurance provider and home emergency provider. The customer was contacted by their insurance provider who said a CMC had submitted a mandate to pursue a claim. When the customer contacted the CMC directly to state they didn’t want the CMC involved they were invoiced £144 for ‘professional services.’