This speech was given as part of an adjournment debate in Westminster Hall the House of Commons, on 16 January 2007
Mr. Richard Bacon (South Norfolk) (Con): I am very pleased to have the opportunity to present this debate on the Government’s prosecuting policy on induced car accidents.
An induced car accident happens when fraudsters who wish to claim from an insurance company drive motor vehicles to busy road junctions where they perform unexpected, unnecessary and dangerous emergency stops designed to cause innocent members of the public to crash into them. There are several favoured methods. Some disconnect the brake lights of their vehicle and then brake sharply in moving traffic once a victim is positioned behind. Others pull on to roundabouts from busy slip roads, then brake sharply once six to 10 feet over the line.
By forcing victims to crash into them from behind, under current insurance law, fraudsters can rely on a virtually automatic admission of liability by the victim’s insurers. They then submit multiple insurance claims—for personal injury, loss of earnings and so on—on behalf of the driver and multiple fake passengers, who are members of the criminal gang. If undetected, a single crash can net as much as £30,000 for the gang.
What is the scale of the problem? Research by the Insurance Fraud Bureau indicates that since 1999 over 22,500 fraudulent motor accidents have taken place throughout the country. The scam was first detected in the north of England, and insurers are now aware of gangs operating in many large UK cities and towns. Recently, there has been prolific growth in such activity in London and the south east. In 2003, insurers were aware of just four criminal gangs operating in the UK, but by November 2006, that had grown to 40, with an average of three new gangs being detected per month. Industry experience has shown that, once well established, such gangs can potentially induce 300 to 400 accidents per year. The problem is huge and growing.
Mr. John Greenway (Ryedale) (Con): I congratulate my hon. Friend on securing the debate. Does he agree that fraud is never a victimless crime — particularly insurance fraud — because we all pay through the premiums resulting from the fraudulent claims? Furthermore, does he share my concern that induced accidents are a serious threat to public safety and that innocent people could become embroiled in an accident resulting in serious injury or loss of life? That element stamps this as a real menace that must be tackled by the Government, the police and insurers in partnership.
Mr. Bacon: I am pleased that my hon. Friend raised that point. The threat to public safety is the single biggest problem. Of course, there are other issues, such as rising motor insurance premiums. I know that he has taken a big interest in the matter, as the chairman of the all-party group on insurance and financial services. He is right: the very serious and growing threat to public safety is the single biggest issue. Serious injuries such as broken limbs and crushed rib cages can occur, and have done. If the fraud is allowed to continue, there will almost certainly be fatalities and a growing injury rate.
Some evidence suggests that women driving alone and those on the school run with children are targeted by fraudsters because they think that they are more likely to admit liability. As my hon. Friend said, these crimes are forcing insurance premiums to rise, which is paid for by innocent motorists, and insurers estimate that the fraud is now yielding at least £200 million a year for organised criminals. The phenomenon is growing so quickly, however, that that could be a significant underestimate. We are talking about many hundreds of millions of pounds.
That links directly to the third issue: cash generated from the fraud is fuelling the growth of organised crime. Norwich Union referred to that in its 2005 fraud report, “Shedding Light on Hidden Crime”. Insurers believe that the proceeds from induced car accidents are being used routinely to fund other forms of organised crime, including drugs and people trafficking, benefits and credit card fraud and money laundering. It might even be funding terrorism. Induced accident fraud started among predominantly Muslim gangs in the north of England, but has now spread so widely that criminals from all backgrounds are involved.
It remains the case, however, that the gangs that started the earliest and so acquired the most expertise have been the most successful in perpetrating the fraud. That is reflected geographically in the figures for the number of staged accidents. The Insurance Fraud Bureau has estimated that since 1999 there have been 22,605 staged or induced accidents, and has broken them down city by city. Blackburn comes top, with 1,710 staged accidents since 1999—7.5 per cent. of the total. Bradford and Birmingham come next, followed by Oldham. Those four cities alone account for more than a quarter of all such crashes. Bolton, Manchester, Liverpool and Preston come next and bring the total to more than 42 per cent.—some 9,500 crashes. The Serious Organised Crime Agency monitors terrorists’ finances. I hope that the Solicitor-General can tell us that the agency is aware of those figures, which indicate a significant concentration in a small number of northern cities where Asian gangs — they are predominantly Muslim — started this fraud.
I shall examine the reasons for the quick growth of the fraud. Before 2006, the police were generally unable to investigate these organised gangs. Typical cited reasons for not doing so are limited resources or the low prioritisation of fraud in the national policing plan — no targets were set. This fraud has been an extremely profitable and almost risk-free activity, so it would have been extraordinary if it had been ignored by organised crime. Since 2006, with the growing focus on fraud as a national issue, police forces in the south of England have begun to investigate more cases of such fraud. In notable cases, prosecutions are ongoing. To date, however, no police force in the north of England, where this problem started and is most prolific, has investigated a single case. Consequently, the vast majority of the 40 known gangs operating in the UK are not under investigation.
I remind hon. Members that it took six to seven years to generate more than 22,000 crashes. The Insurance Fraud Bureau believes that at the current rate of growth, a further 20,000 crashes will be generated over the next 18 months. Another reason for the growth is that the crime is so profitable and easy that it is now being franchised. Insurers have obtained intelligence that they believe indicates that the largest and most prolific gang in the north-east is effectively selling franchises to other gangs, providing support, set-up and driver training. I am given to understand that requests to investigate the gang have been refused routinely by the relevant police authorities.
I shall examine the implications for the policing and prosecuting authorities. It is a national problem requiring a structured national response. In my view, any significant delay represents an unacceptable risk to public safety. Without the consistent threat of prosecution across the UK, experience has shown that the problem will continue to grow. Police targets are set on the basis of harm caused to individuals and society by a particular crime. That approach makes a strong case for making the prosecution of induced accident fraud an immediate priority — it poses a direct risk to public safety, funds organised crime and possibly terrorism, and impacts on society through higher motor insurance premiums and the rate at which the problem is growing.
In my view, a case could be made also for the immediate ring-fencing of police anti-fraud resources around the UK, as recommended by the Attorney-General in his excellent fraud review last year. Without that, we can reasonably expect a continued erosion of specialised police anti-fraud resources. In the past decade, available resources for combating fraud outside London have been halved. Last year, at the request of the Home Office, following representations from the insurance industry, an evidence-based threat assessment was submitted to the Home Office by the Association of British Insurers detailing and quantifying the threat to the UK of induced accidents and requesting urgent and co-ordinated action from law enforcement agencies.
That has been superseded by more recent research by the newly formed Insurance Fraud Bureau indicating that the problem is significantly larger than first thought. Details of that research were presented to the all-party group on insurance and financial services, chaired by my hon. Friend the Member for Ryedale, and subsequently shared with MPs from affected constituencies. I would like clarification from the Government on a number of questions. First, who in the Government is responsible for considering the implications of the research and deciding on an appropriate course of action? Secondly, is such consideration ongoing, and if so, when will a decision be reached? Thirdly, will the relevant Minister advise us on the action to be taken to combat the national problem of induced accidents and on how the Government intend to stop its prolific growth? Fourthly, will that Minister agree to meet with the Association of Chief Police Officers to discuss how to prioritise the arrest and prosecution of such gangs before the problem escalates out of all proportion?
Induced accident fraud is just one example of the wider problem of fraud. Its recent growth is connected to low awareness of fraud and the fact that it has not been a national policing priority. However, it is important to say that good work is now being done. I applaud both the growing efforts of our police in the south-east and the excellent work done by the Attorney-General’s fraud review team.
Almost overnight, our perception of the problem has changed. For example, the Attorney-General’s review concluded that fraud as a crime is perhaps second only to class A drugs in the harm that it does nationally. Induced accident fraud is only one of the many rapidly growing methods of fraud facing us, which include VAT fraud, benefit fraud, credit card fraud and corporate fraud. I welcome the Attorney-General’s review of fraud and support its recommendations, which once implemented will lay the foundations of a more fraud-resistant economy and society. I await the Government’s response to those recommendations and would welcome active steps to ensure that they are implemented as soon as possible. The Attorney-General’s report recognised that there are currently no up-to-date statistics on the extent and impact of fraud on the UK. I await with interest the ACPO study to measure that, which I believe is due to be published next month. Perhaps the Solicitor-General could tell us whether he has met the Attorney-General to discuss the recommendations of the fraud review and say what hope he has that the recommendations will be implemented.
I have focused most of my remarks in this debate on induced accident fraud, so I hope that the Solicitor-General will concentrate primarily on that in his reply. I hope that I have persuaded him of the seriousness of the issue. Induced accident fraud is one of the most startling forms of fraud. It targets innocent motorists in a disgraceful way, and is a significant and growing threat to public safety. It offers organised criminal gangs easy pickings that are nearly risk-free for the fraudsters. Although some police forces are now taking an interest, there is a long way to go. There are large parts of the country, particularly in the north of England, where the organised criminal gangs undertaking the fraud are unimpeded and uninvestigated, and can operate with virtually zero risk of prosecution. Finally, the proceeds of such crimes are used to finance more organised crime. This cannot continue.
The Solicitor-General (Mr. Mike O'Brien): I congratulate the hon. Member for South Norfolk (Mr. Bacon) on securing this debate on an issue that I agree demands greater public awareness. The insurance industry has been aware of it for some time, but only a relatively short time, in the sense that such fraud has grown quite spectacularly in recent months and years. I also welcome the hon. Member for Ryedale (Mr. Greenway), who has taken a keen interest in such issues.
The Government take seriously the increasing prevalence of induced car accidents and their effect on communities. Innocent road users — they are often mothers taking their children to school in the morning, who might be seen as easy victims, as the hon. Member for South Norfolk pointed out — face physical injury, emotional trauma and the shock of having an accident, perhaps in the middle of a busy roundabout, which is a favourite location for induced accidents. The victims of such fraud also face damage to their vehicle and the inconvenience of having to deal with the accident and their child, who might be very upset, as well as the loss of their no claims bonus and increased premiums. All that means that individuals can be quite badly affected by induced accidents. The general public are also at risk and need to be aware of the problem, because all of us who drive cars face increased insurance premiums as a result of the growing problem.
We are also aware that some of the money that is paid to the criminals might be diverted to other kinds of criminal activity. I do not have any evidence that it is diverted towards terrorism, but no doubt other criminals have used it for various purposes.
The way in which we address the problem must involve three key elements. First, there must be a response by the authorities, particularly the police and the Crown Prosecution Service. Secondly, the insurance companies must recognise, as they are doing, their responsibility to focus on claims that happen in the sorts of circumstances in which induced accidents may occur, ensuring that their investigators focus on particular incidents, gather the evidence and, if appropriate, refer the matter to the police. Thirdly, we need the public to be aware when they have accidents of the sorts of circumstances in which such incidents arise. Those concerned need to ask themselves whether they have had a real accident or whether, when they were trying to get on to that roundabout, the guy in front of them just pulled out and jammed on the brakes. The victim might not have seen any brake lights because the lights had been disconnected and because they were watching the cars coming from the right, round the roundabout. That is one of the ways in which such fraud is perpetrated.
Mr. Bacon: The Solicitor-General is absolutely right to say that there needs to be attention by the authorities, the public and the insurance companies. That might eventually lead to a change in a technical aspect of insurance law, which has always assumed that the car hitting from behind is guilty. The insurance companies have done a great deal in recent years, appointing investigators, gathering evidence and secretly filming such incidents. However, does the Solicitor-General accept that even when the insurance companies have presented the prosecuting authorities with evidentially sound bundles, with pink ribbons around them, and said, “There, prosecute that”, they have found resistance? That is one of the problems.
The Solicitor-General: I cannot accept that, because I do not have any evidence for it. However, the hon. Gentleman says so and no doubt he has been informed of that by the insurance companies. If he has evidence that that has occurred, I should be happy to look at it and talk to the CPS about why that might have occurred, or to the Home Office, if the police have felt unable to conduct such investigations. However, I entirely accept the view, which has been increasingly put to us in consultations with the Association of British Insurers and the insurance industry more generally, that induced accident fraud is a growing problem. It puts innocent individuals at risk and is a growing criminal issue that needs to be addressed.
I am concerned by the hon. Gentleman’s references to police in the north of England. I agree that some of the problems appear to have arisen initially in West Yorkshire. The issue came to our attention in early 2005, with a spate of accidents in West Yorkshire that followed a similar pattern. However, prosecutions are also taking place in a number of counties in the south of England. There is a growing awareness of the problem by the police, and I suspect that we shall see an increasing focus on it in the months to come.
Key actions for the police service, as set out in the recently published national community safety plan, include the need to have strategies to address all major threats, including fraud. The hon. Gentleman is quite right to say that fraud is currently not one of the key policing indicators. We always have to be careful about how many targets we set for public services. He will be aware of the criticisms that his party has made of the number of targets that are presented to public authorities. We need to hold discussions with the police about how they deal with such issues, and about where KPIs and other targets have a role. However, the national community safety plan includes references to fraud, and we have flagged up with the police the need to deal with it.
I welcome the hon. Gentleman’s comments about the fraud review, which the Attorney-General conducted recently, and the close work that has been undertaken between our Department and the insurance industry to examine some of the issues that it faces to do with fraud. The results of the review have been broadly welcomed by the insurance industry and I hope that that will make a significant change.
Another thing that will make significant change is yesterday’s introduction into law of the Fraud Act 2006. That is significant, not only because of some of the increased penalties—in one case doubling the penalty for fraud from five years on indictment to10 years—but because it will make it easier to focus on the reality of the fraud rather than on the technical problems of implementing some of the fraud-related provisions of theft legislation. I hope that that new legislation, which I helped take through the House of Commons, will help to enable the police and prosecuting authorities to focus more effectively on such crime.
Mr. Bacon: The Solicitor-General’s point about KPIs is well taken; there is a limit to how many targets we can have. Lately, Lord Browne of Madingley was in the news, saying that no organisation should have more than 10 targets—he was referring to BP, of course—and that if it has, it will be lucky to achieve six of them.
However, if police targets are set on the basis of harm, and if the Attorney-General’s view is that the harm caused by fraud is second only to that of class A drugs, surely there is a case for reviewing the national police priorities and considering whether fraud ought to be moved up, perhaps at the expense of something else? Fraud is a national policing priority in Scotland. Will the Solicitor-General consider the case for introducing fraud as a national policing priority?
The Solicitor-General: For a considerable time, there have been all sorts of discussions about what the key policing indicators should be. Fraud has been discussed in that context; it was when I was at the Home Office some years ago. Such discussions with the police are always difficult, because they know that they are only able to focus on particular issues.
We want to ensure that fraud is dealt with as a key issue without it necessarily having to be one of the KPIs. However, we shall discuss the matter again with the police in due course. Let us ensure that we have the appropriate focus to deal with the problem of induced accidents. As I have already indicated in the national community safety plan, we regard that as important. It is a growing problem, and I welcome the fact that this debate has enabled me to raise its importance.
We have consulted the Association of British Insurers, which estimates that there could be as many as 10,000 induced accidents a year, costing us more than £200 million in insurance. Such fraud impacts on us all, as insurance fraud alone puts our car insurance premiums up by about 5 per cent. Under the Fraud Act 2006, police and prosecutors will be able to use modern and flexible statutory offences to help ensure that criminals who stage accidents to commit fraud are brought to justice. I am very pleased that such provisions became law yesterday.
The recently published fraud review suggests how the Government and industry can work together to fight fraud. The insurance industry is undertaking an identification of fraud and seeking to develop its means of dealing with the problem. The review team worked closely with the Association of British Insurers and its recommendations presented a range of proposals, from prevention through to investigation and prosecution.
It is important that there should be a sufficient criminal justice response to staged accident fraud. The police and the CPS fully appreciate the seriousness of staged traffic accidents, because of not only the criminal offences and sums of money involved but the real and serious danger to road users and the impact on the innocent motorists and passengers targeted by such criminals.
The CPS and the police are working closely together on such cases. When such serious allegations are made, the CPS is responsible for authorising the police to charge suspects. Advice from the CPS is increasingly sought by the police at the earliest stages of investigation; prompt action is being taken to restrain assets. Case management systems are now being set up from the outset to assist in the compilation and analysis of evidence and the conduct of court proceedings.
However, the CPS must review each case on its merits. We need the evidence and to ensure that it is in the public interest to prosecute. Cases of induced accident will normally be in the public interest, because they are an increasing problem with which the criminal justice system has to deal. Any conviction is likely to result in a substantial sentence that will include compensation and confiscation.
In December 2006, the CPS launched its public consultation on bad driving. Many of the responses are from members of the public who have been involved in traffic accidents. Their accounts of the incidents and their impact on them and their families highlight the significant consequences of even the most minor of unavoidable accidents, let alone more serious collisions and the induced accidents that we are discussing today.
We know that the various fraudsters involved in induced accidents get a significant amount of money. The average insurance bill for such accidents is £25,000 to £30,000, and the total cost to the industry in 2005 was estimated at in excess of £200 million. The issue is significant, and we need to address it. Induced or staged accidents are not just about insurance companies, fraud or the money, but collisions and injuries to individuals.
We must recognise not only the insurance industry’s problems, but the difficulty and pain inflicted on individuals whose lives are put at risk by such criminals. We need to raise public awareness and ensure that insurance companies are establishing appropriate ways of dealing with the issue. I agree with the hon. Member for South Norfolk that the insurance companies are now putting the appropriate responses in place and ensuring that their investigators are conscious of the need to deal with such issues. The companies are putting in place mechanisms to enable them to put together evidence.
I want to ensure that there is greater co-operation between the police, the CPS and insurance companies and a greater awareness among the public. If someone is the victim of what they think was an accident, they should think about whether it was that or something far worse. If that conjunction of elements can be brought together, we will have a fair chance of seriously coming to grips with a new but growing problem.
Mr. Bacon: The Solicitor-General is generous in giving way. I am encouraged by some of his words; he is right in saying that the problem requires work and effort from everyone, including the public.
Lawyers have considered and tested the evidence for some such cases and found it to be sound and robust. They have considered the case robust, but there have been difficulties in persuading the CPS or the police to take it forward. Would the Solicitor-General be happy to consider those evidence bundles to establish whether the cases should go forward?
The Solicitor-General: I hesitate to agree to investigate and take an individual view on what might be hundreds and hundreds of cases. We employ the CPS to consider evidence; the police assess evidence and put it together for the CPS. It is not for Ministers to try to usurp those roles. None the less, it is important that, when the evidence offers a realistic prospect for prosecution, such cases are properly considered, investigated and dealt with.
A chief constable has to take a view on the appropriate allocation of his officers’ time and effort and it would not be appropriate for me to say to particular chief constables, “You must allocate your police officers’ time in this way.” We must give some authority to chief constables and ensure that cases are dealt with properly. It is also essential that the public, the police and the CPS are aware of induced accidents and that, together with insurance companies, they all get their acts together to ensure that we deal with them.
Question put and agreed to.
Adjourned accordingly at one minute to Two o’clock.