But fraudulent claims worth over £730 million were detected in 2008, a 30% increase since 2007, suggesting insurers are hitting back at insurance cheats.
The overall cost of fraud, however, remains high. The ABI report estimates the total cost of undetected insurance fraud at £1.9 billion a year – £5.2 million every day – up 24% from the 2007 figure.
Opportunistic retail fraud, where individuals inflate a genuine claim, remains the most common and costly type of insurance fraud. But 2008 also saw a 35% increase in businesses making exaggerated claims.
The report warns that modern distribution methods, such as online sales, may also encourage underwriting fraud, where individuals and businesses try to keep premiums down by not disclosing or by misrepresenting material information.
"Our research suggests that customers are more likely to commit underwriting fraud when they buy insurance via distance-selling channels," the paper states. "Closer liaison between insurers and the relevant intermediaries – comparison websites, for example – may help address this risk".
How much of all this is due to the current economic downturn is not yet certain. But the ABI says there are clear indications that the recession is already having an impact.
Insurers and loss adjusters are reporting an increase in "walk-aways", where a claim is abandoned when the insurer starts asking questions. Where claims are pursued, significantly more of them are being referred for investigation and are subsequently found to be fraudulent.
There has also been an increase in very amateurish attempts at claims fraud, suggesting that otherwise honest customers are submitting fraudulent claims for the very first time.
But, for some at least, attitudes to fraudsters are hardening. While a recent survey of 3,000 adults revealed that one in five policyholders would seriously consider making an exaggerated or completely made up insurance claim, the monthly volume of calls to the Insurance Fraud Bureau's "Cheatline" has increased five-fold since August 2006.
Insurers are also improving detection rates. The value of detected fraudulent claims has risen year on year by an average of 30% since 2004.
The report cites a number of reasons for this, including the use of dedicated fraud teams, more sophisticated automatic processes to weed out suspect claims, the increased use of cognitive interviewing techniques and greater awareness and vigilance within firms.
Welcoming these improvements, Nick Starling, the ABI’s Director of General Insurance and Health, said there was no hiding place for insurance fraudsters:
“The tough approach taken by insurers to protect honest customers means that they are detecting more of the fraud committed. Closer scrutiny of proposal forms and claims, as well the exchange of information through industry-wide databases, is tightening the net on the cheats.
"Getting a criminal record, as well as difficulty in obtaining and more expensive insurance and credit problems await anyone who sees insurance as a soft touch" he added.