The recession is causing insurance companies to be more vigilant about claims. Last year saw an increase of fraudulent insurance claims. So, if you’re thinking about pushing the car off a cliff, don’t. It’s been done.

Last year, the Association of British Insurers found 107 000 fraudulent claims, amounting to £730m. This number is up by about 30% from the previous year and has been rising every year for the past 4 years.

Fraud is a temptation during a recession. According to the ABI, people are using the payout money to settle debts or, in some cases, buy things that they can’t otherwise afford.

Home insurance suffers the most from false claims. Insurance companies detected 55,000 false or exaggerated claims last year alone. However, motor insurance claims reached £360m last year. One owner submitted a claim for a car that had been stolen from a car park, later admitted that he was planning to pay off his debt with the payout.

Another man, who had been holidaying in West Africa, submitted a claim for ‘recovery expenses’. The insurance company denied his claim because it included services at a local brothel.

The ABI’s director of insurance, Nick Starling, knows that fraud thrives in a recession. This is why insurers are making sure they find insurance cheats.

The prevalence of fraud in the insurance industry pads insurance premiums by about £40 a year. This is why insurers work to ensure submitting a false claim is nearly impossible. If they can do that, the premiums will be more competitive for honest customers.

The ABI first started collecting figures in 2004, with detected fraud costing companies £260m. This figure then rose to £410m in 2005, £470m in 2006 and to £560m in 2007.

Norwich Union maintains that the majority of claims are still genuine. Sue Cowes, a fraud investigator at Norwich Union, looks out for unusual remarks, patterns in a series of claims and the age of the policy.