At McLarens, we’ve seen a marked increase in suspicious claims from within the public sector, and one group in particular has stood out: leaseholders.
Our in-house counter-fraud team has identified a growing pattern of exaggerated or dishonest claims coming from leaseholders in the 2024-25 financial year.
Internal data suggests that as many as one in four claims involving leaseholders has some element of concern escalated to our Investigation Practice.
These claims often arise after an insurable event, where some individuals seize the opportunity to inflate losses, submit falsified documentation, or stretch the truth for financial gain.
This type of opportunistic fraud can encompass everything from inflated claims for damaged stock, to fabricated contractor invoices for repairs that were never performed.
Since leaseholders often do not see themselves as personally liable (unlike with their own insurance), there's a misconception they have nothing to lose.
In reality, many lease agreements include contributions to a building’s insurance premium, making leaseholders technically co-insured. What’s more, where fraud is identified, insurers are entitled to take action under the policy, including voiding the relevant part of the claim and pursuing legal consequences.
UK Legislation on the offence of fraud (see the Fraud Act 2006), makes the attempt to defraud the crime. The mere fact that an individual, company or entity attempts to obtain an advantage by way of dishonesty constitutes fraud as defined by the Act. In short, the attempt is the offence.
Fraud vigilance
These are some of the common leaseholder claims we see:
- Exaggerations on stock damaged during a fire
- Excessive or unreasonable demands for specific alternative accommodation requirements following an escape of water
- Fictitious documents such as invoices from contractors that don’t exist.
In fact, there is no type of loss or peril where we do not have some form of experience of a false, bogus, or inflated claim. Unfortunately, some individuals have a mentality of taking advantage wherever they can.
On one recent investigation we conducted, we found that following a storm and rainwater entering the premises causing damage, the leaseholder had received a quote from a local contractor which they manipulated to increase the value.
Thereafter, they used the template of the original document to create a ‘second’ quote allegedly from another local firm, which had in fact never been contacted in relation to the matter.
The leaseholder sought to inflate the value, hoping for payment to be made directly to them so they could pocket the difference.
Fraud diligence
That is not to say that every claim involving a leaseholder is fraudulent, but in response to this threat all those involved in the claims process must consider a fresh approach to dealing with claims of this nature. That includes local authority claims teams and social housing organisations, their managing general agents and third-party agents, as well as loss adjusters acting on their behalf.
An insurance policy may provide cover to a specific peril, but it remains a responsibility not to make payments without due care and consideration, and fraud awareness.
Attention to detail is paramount: verify facts and challenge inconsistencies. Implement robust processes for validation, and use new technologies, such as AI document analysis tools, which can detect false or manipulated evidence.
Individuals handling claims should consider their approach to losses involving a leaseholder and ensure a claim is properly reviewed frequently, with consideration given to the possibility that the claim or loss presented may have some element of untruth.
Where there is any doubt as to the validity of a claim, seek appropriate guidance and refer it to those with specialist knowledge.
If necessary, engage with expert professional investigation practitioners to conduct the correct due diligence on the claim. They will interview claimants and witnesses, gather evidence through open and closed source intelligence, and make necessary enquiries and establish facts.
The impact of fraudulent insurance claims is wide, and it affects all of society, draining resources, specifically of ALARM members, public bodies and public sector providers, as well as increasing costs and impacting the public purse and other financial resources.
Fraud continually drives up the cost of premiums and impacts honest individuals, companies, entities and public bodies, and cannot go unchecked. Excellent service for genuine claims is a commitment by insurers, however, fraud remains a significant and real threat to the industry.
