Archive for Insurance Fraud

Was The RMS Titanic Sinking An Insurance Fraud?

In 1998 American Robert Gardiner in his book ‘Titanic: The ship that never sank’, first postulated the theory that on the 14th of April 1912, a hundred years ago today, that RMS Titanic was scuttled for the Insurance money.

More importantly it wasn’t even the Titanic that sank, but her older decaying and seriously damaged sistership, RMS Olympic, in what would become one of the greatest insurance frauds of all time – if proved to be true!

Was the Titanic disaster the greatest Insurance fraud ever?

Mystery, Myth and Money Surround The Whole "Titanic" Sinking Tragedy

Insurance Blogger whilst initially thinking what a load of ……, decided to look deeper into the ‘conspiracy’ and in particular the question of marine insurance for the vessel.

In order for the possibility of an insurance fraud to have taken place answers must be given to the following questions:-

Did the Owners, Company or individuals stand to benefit from the total loss of a ship?

Could the Titanic have been swapped for the Olympic as Gardiner proclaims?

What evidence is there to prove that the ship lying two and a half miles down at the bottom of the Atlantic is indeed the Olympic ?

Incredible as it first seems, the more you look into the assertations, the more feasible the fraud becomes!

And there is some amazing evidence to suggest that persons or persons unknown conspired to defraud the insurers of £1 million of hull cover, unknown P & I liability losses and cost life insurance and personal accident companies nearly £3 million.

Titanic – The Case for Insurance Fraud

Before we discuss the evidence for fraud in the sinking of the Titanic it is important to set the economic scene for 1912.
In particular the fight for the most lucrative transport routes at the time, not dissimilar to the airline struggles of today with the exception that sea travel had a monopoly on trans-atlantic trade, there was no alternative.

The White Star Line was ultimately owned by International Mercantile Marine (IMM) and after years of struggling to win trade, they commisioned the Olympic class liners in 1907 to try to take the luxury end of the market.
For the previous fifteen years the lucrative passenger sea traffic to and from the US from the UK, France and Europe was dominated by the super-fast German mercantile fleets that held the Blue Riband for the fastest crossings.
The SS Kaiser Wilhelm der Grosse and SS Deutschland (1900) owned respectively by the Norddeutscher Lloyd and the Hamburg America Line HAPAG, the two German top shipping companies.

In the UK, Cunard rose to the challenge with the launch of the RMS Mauretania and her ill-fated sister ship, the RMS Lusitania. The ships were very fast and the Mauretania went on to keep the coveted Blue Riband for more than twenty years, from 1907 to 1929.

The White Star Line, who had been losing money for years, struck back with the Olympic class and the upgraded Titanic was supposed to be the largest and fastest of the luxury ocean liners to rival the Maurtania for speed.

Construction of Olympic started in December 1908 and Titanic in March 1909.
The two ships were built side by side at Harland and Wolff’s Belfast Shipyard.
The construction of a third ship the RMS Gigantic began in 1911 after the commissioning of Olympic and Titanic’s launch.
Following the sinking of Titanic, Gigantic was renamed Britannic, and the two remaining vessels underwent many changes in their safety provisions. The Britannic was sunk by a mine in 1916.


What was Covered?

Willis Faber & Co. (today part of the Willis Group) are reported to have brokered the deal for underwriting the hull and cargo insurance for the Titanic. The original boat insurance slip was passed to Lloyds Mercantile Dept for underwriting, but is since reported lost to this day.

There is some dispute about the value of the Willis contract however all newspaper reports of claims paid out and enquiries staged immediately after the sinking report that the Hull was underwritten for loss and liability at Lloyds for $5,000,000.

In 1912 both the USA and the UK were on the Gold standard and the exchange rate was always very close to $4.87 to the £1 or 0.21. This meant that the policy for the hull was insured for around £1,050,000. Perhaps more importantly, the actual cost of building or replacing the vessel was £1,680,000 or $8m, meaning that the hull was significantly under-insured and the owners were bearing a third of the risk as captive. This was an unusually high amount of risk taking. At the time marine insurance would usually only provide for three quarters of the risks, as P & I Clubs (ship owners collective pools) always carried a quarter of the collision liability risk and provided accident cover for the crew, and still do to this day.
It is unknown what if any cover was paid out by White Star to a P & I Club for staff liability. What became evident after the event to many of the 800 plus families of the Crew that perished, who were nearly all from Southampton, was that they received paltry or little compensation for their losses and years of subsequent poverty.

In addition to the hull cover, the marine insurance policy issued by Lloyd’s to the White Star Line for the Titanic included total loss cover for cargo at $600,000 and personal effects at £400,000, which equates to £126,000 marine cargo and £84,000 for personal effects. Both these sums insured proved to be inadequate following the disaster.

What Was Lost?

In an act of incredulous speed all claims by the White Star Line for loss of the Titanic, were paid out within a week of the ship sinking and the Lutine Bell being rung at Lloyd’s on the 15th of April.

The company was reimbursed for the loss in a straightforward process that was completed long before any official enquiries heard evidence as to the cause of the sinking.

Claims for loss of life and personal effects were taking a little longer.
Imagine that today, when you have to wait weeks for compensation for just a minor car insurance claim!

The New York Times of one week after the disaster, reported the speed of the claims payouts and lists all the amounts claimed and the processes involved in the claim.

Titanic claims paid out in super fast time!

Click to read the original NY Times reports that all Titanic claims are paid out within a week!

The list of Claims losses paid out were:

Titanic Hull Insurance – Actual loss $8,000,000 – Paid out $5,000,000

Titanic Cargo Insurance – Actual Loss $420,000 – Paid out $400,000

Titanic Personal Effects – Actual Loss $1,000,000  – Paid out $600,000

Life Assurance Passengers -  Actual Loss >$4,000,00 – Paid out $2,125,000

Over 119 Life insurance companies paid out the largest of which was the Travelers Insurance company of Hartford, Connecticut.

Personal Accident Claims – Actual Loss >$2,000,000 – Paid out $1,564,000

Over 48 personal accident companies were involved in claims payouts.

The Olympic Switch

The case for an insurance fraud begins with the RMS Olympic. If a conspiracy to defraud existed it would have began sometime after September 1911 and before April 1912.

On September 20th 1911 while in the Solent returning to Southampton RMS Olympic was struck and severely damaged by a collision with cruiser HMS Hawke.

The Liner, despite being holed above and below the water-line in two places and damaged for 38 feet, made it the fifteen miles or so back to port under tug.

Eyewitness reports suggest that the route of the Hawke and the Olympic intersecting may not have been an accident at all. Interestingly, the Captain of the ship that day was none other than Edward J Smith, Captain of the ‘”Titanic” some seven months later.  The ship was temporarily patched up and returned to dock in Belfast alongside the nearly complete Titanic.

White Star quickly had the damage assessed by marine engineers, and put in a claim. However beause it was well below a policy excess of $750,000,  the claim was repudiated.  In December White Star brought the claim to court, this time claiming $750,000 for loss and damage to the ship including lost passenger effects, to make up the difference to the excess.

The court ruled that the collision was entirely the fault of the Olympic, the only saving grace being that they would not have to pay damages to the Royal Navy as the Olympic was under compulsory pilotage at the time. A further appeal was rejected in 1913.

Unable to collect money for her repairs, White Star was left with a severely damaged ship, quite possibly a lot more damaged than originally thought, which was losing money by the day, by being unable to collect fares and fulfill bookings.

Titanic and Olympic in Harland & Wolff Belfast

Titanic and Olympic undergoing sea trials in Belfast early 1912. But which one is which?

The basis of the case for conspiracy to defraud starts here.

Gardiner asserts that the damage to the Olympic was tantamount to a write-off. In particular the secondary damage to her starboard engines, drive-shafts and propellers which rendered her incapable of reaching speeds of more than ten knots as she limped back to Belfast for repair.

On closer inspection of the damage at Harland and Wolff it was realised that it would take six months to get her in the least bit seaworthy again. The repairs would have to be paid for by the White Star Line which was already committed to $16 million for the building of the Titanic and the half-built Britannic.

The costs of the repairs would in effect wipe out the White Star operating profit for that year, a third of the income of IMM, and the losses from having no ships at sea for six months would equate to another $500,000 plus.

The decision was taken by senior executives at both White Star Line and Harland and Wolff to swap the ships and bring into service, the very near to completion Titanic, as the Olympic.

If the decision had not been taken jobs would be lost and the shipyard and White Star would be threatened with closure.

Getting the Titanic a certificate of seaworthiness was at least six months away. Olympic already had one!

The Swap

Ship swap is reported to be the most common form of marine insurance fraud practiced in the 19th century although this is as yet unsubstantiated.

It would only take a handful of ready picked dockers and tug operators and a skeleton crew to be involved in any movement and re-berthing of the ships, particularly as they were constantly being put to sea for tests.

Both ships were mysteriously painted in the same black and white livery, the Olympic having previously been painted all white.

After the repairs in Belfast including changes to cabins, without doubt the only outwardly visible reported differences between the two ships appears to be the layout of the 1st class passenger B deck, which was enclosed on the Titanic according to the original plans. Photos of the ‘Titanic‘ leaving Southampton and Queenstown show a different layout!

Fitters, Electricians, carpenters etc in Belfast would not necessarily know which ship they were on a short term contract for, and even if they did, they were kitted out almost identically. Final fittings and named objects could have been loaded on-board in boxes to both ships at anytime. In the closed shop world of the protestant dockyards of Belfast and the fraternal offices above, a conspiracy involving less people than the Great Train Robbery is not so hard to envisage.

None of the crew or staff would have been aware of what ship they were on when they signed on in Southampton.  Just what the nameplate told them.

The “Olympic” put to sea and started earning off the North Atlantic run in early 1912. It was only two hundred miles from the “Titanic”  returning to the UK, when the “Titanic” sank!

There is some excellent photographic evidence which shows the damage repairs to the  Olympic following its collision with HMS Hawke and in later years where there is no sign whatsoever of repairs!

You can read more about the ship swap, see photographic evidence and watch a documentary at TitanicUniverse

You should also have a look at Mark Chirnside’s university dissertation which argues subjectively the case against a fraud.

Having looked at all the evidence Insurance Blog believes that a ship swap did take place, however not for the purposes of committing an insurance fraud but out of business economic necessity.

So how did what had been a business decision to hoodwink the Ministry of Transport turn into an insurance fraud?

Well the matter of an Iceberg for one thing!

Gardiner goes on to explain all sorts of incredulous reasoning about how White Star planned to scuttle the ship and had pre-arranged a collision in mid-Atlantic, however all this was unnecessary if the iceberg was just an accident.

This explains why the ship was under-insured, White Star never had any intention of scuttling the ship. The swap was purely to keep the company in business!

White Star did effectively gain out of the loss of the “Titanic”.  The loss cost them just £680,000.  A lot less than the $8 million required to fund a new vessel, which they did!

As an interesting footnote, Chairman of White Star J Bruce Ismay, the man William Randolph Hearst choose to bully and pillory as a coward, went on to hold prominent Director positions on the boards of the Liverpool and London Insurance Company, Globe Insurance Company, Royal Insurance Company and the Thames and Mersey Marine Insurance Company.

Three Pigs Convicted Of Insurance Fraud

The Guardian is reporting that the verdict is in at the trial of the three pigs on Insurance fraud.

The pigs have been found guilty of attempting to defraud an unnamed UK household  insurance company out of thousands of pounds and bearing false witness and committing perjury in the recent trial of Mr Wolf, who the pigs had been telling porky pies about. The pigs lies were sniffed out when claims farmers smelt a rat. The rat later confessed to fixing the insurance sting for the pigs.

Justice Fox described the pigs defence as ‘ham’.  He said “Pigs who make false claims put up the cost of insurance for all of us. The pigs will be sentenced at a later date. Insurance Blog hopes they fry!

Follow the best non-insurance insurance story this year at http://www.guardian.co.uk

UK Insurance Fraud On The Rise Despite More Detection!

We’ve predicting it here at Insurance Blog for quite some time and now its official..

Insurance Fraud is on the rise again!

A symptom of every recession, the difference this time is that detection rates of Insurance Fraud are also on the increase, but that doesn’t seem to be bothering those intent on criminal deceit, according to the latest figures released today by the ABI (Association of British Insurers).

They Never Learn!

You could not make it up but some false claimants did.

Insurers are detecting more fraudulent claims than ever: over 2,500 worth £18 million every week

A gymnast with back trouble, a flying toilet roll holder, an invented wedding engagement, a fake photograph and an invisible wall were among the record number of fraudulent insurance claims detected by insurers in 2010, state the ABI.

The figures highlight that in 2010:

• Insurers uncovered 133,000 fraudulent insurance claims – 2,500 every week – up 9% on 2009. The value of these claims was £919 million, also up 9% on the previous year. Over the last five years both the number and overall value of insurance frauds detected have risen by over 100%.
• The most common frauds involved home insurance with 66,000 bogus or exaggerated claims detected, followed by dishonest motor insurance frauds with 40,000 frauds uncovered.

Car Insurance frauds were the most costly, costing the industry £466 million.

• The value of savings from detected frauds represented 5% of all claims, compared to 4% on 2009

Cheats uncovered by insurers include:

• A claim for back injuries apparently sustained from a fall while working in a nightclub was rejected when Facebook images showed the claimant performing gymnastics, and training for a charity run.
• A woman’s claim for facial injuries she said resulted from a falling toilet roll holder in a fast food outlet was rejected when it was shown that the holder would have had to have fallen upwards to cause the injury claimed.
• A man claimed for a ‘lost’ engagement ring. His ex partner said that she was never given a ring as they had never been engaged. On the same day the man said he had suddenly found the ring.
• A claim by a woman for the loss of a £2,000 watch after a night out was rejected when the photograph she provided of her allegedly wearing the watch turned out to be that of a friend.
• A claim for injury said to be caused by falling over a wall was rejected when it was proved that there was no wall at the scene of the alleged incident.

It is estimated that insurance fraud costs £2billion a year, adding, on average, an extra £44 a year to the insurance bill for every UK policyholder.

New National Insurance Fraud Register
Nick Starling, the ABI’s Director of General Insurance and Health, said:

“Insurers are working harder than ever to protect honest customers against fraud. The savings made by weeding out fraudulent claims would otherwise end up being paid for by honest policyholders through higher premiums.

“Fraudsters continually look for new ways to con insurers, so we are upping our game. Early next year we will be setting up a national Insurance Fraud Register, which will contain details of all known insurance cheats. And at the same time the first ever national police insurance fraud investigation unit will begin its operations, making it harder than ever to commit insurance fraud.”

Glen Marr, Director, Insurance Fraud Bureau comments:

“Fraudsters will increasingly find the insurance industry a hostile environment. The IFB is committed to supporting insurer efforts to systematically root out and tackle fraudsters. At the IFB we have access to a significant volume of industry data, use sophisticated and powerful analytical software, work in partnership with insurers, law enforcement and regulators, and have no shortage of reports being received from consumers of their knowledge or suspicions of those concerned with defrauding the industry, through our Cheatline facility.

“We would urge anyone with information on any type of insurance fraud to support industry efforts to root out the fraudsters, by calling the IFB free and confidential Cheatline on 0800 3282550 or by using our online reporting facility at www.insurancefraudbureau.org/report.

Reports to Cheatline can be completely anonymous if necessary. It’s important to underline that some of those concerned with insurance fraud, are also involved in criminal activities where there is harm to local communities”.

Insurance Blog is pleased that when these criminal gangs are caught, their assets will be seized as part of the new Proceeds of Crime Act. Fraud is not a victimless crime and we all pay higher premiums because of it!

Cheap Car Insurance Could Land You In Jail! or Banned for Life!

LONDON – UK Car Insurance comparison website Car-Insurance.tv is warning drivers to be very careful when applying for cheap car insurance…….

cheap car insurance

Car Insurance Fraud has been on the rise in the UK for the last few years.
One could argue disproportionately due to the influx of Eastern European criminal gangs staging road accidents, however the current recession has seen suspected cases of car insurance fraud rise to unprecedented levels, sometimes in very unusual areas.

One worrying factor is the trend to obtain cheap car insurance by ‘lying’ on the online proposal form or over the phone. Much cheaper car insurance premiums can be obtained by those who lie, omit, or deliberately falsely declare information when applying for cover.

Insurance Blogger has even seen some websites encouraging this type of behaviour!

The savvy public looking to save a few pounds will bend the truth to obtain cheaper premiums as a recent case that appeared before Bridlington Magistrates in Yorkshire demonstrates..

A driver of green Ford Fiesta, a Mr Pears aged 24 of Bridlington was found to have been behind the wheel of his car without valid business insurance and was using the vehicle for business purposes without the appropriate insurance cover in place.

The court heard that when police routinely stopped the vehicle, they noticed that
Pears had a number of insulated pizza bags on the front passenger seat. He explained he had just begun working as a pizza delivery driver on a trial basis that day.

Although he was able to produce a valid insurance policy for the car, a quick search of the Motor Insurance Database by the police officers at the scene revealed that the policy had a usage type of SDP and only covered him for social, domestic and pleasure use of the car and excluded business use, the bench heard.

Pears was fined £525 and had his driving licence endorsed with six penalty points.
Costs of £40 and a £15 victim surcharge were also imposed.

What this goes to show is that if you are caught.. and you will be! Your car insurance for the future will never be Cheap!
Indeed you may not even be able to get cover again once you have commited Insurance Fraud!

It could amount to a lifetime Driving Ban!

Cheap car insurance can be obtained legally by comparing car insurance quotes from many suppliers and by answering the questions truthfully, on one form.

The Hidden Costs of Uninsured Drivers in Your Car Insurance Premiums

Car Insurance – Uninsured Drivers Cost You More Than Money!
By Dave Healey

We are constantly reminded that the cost of our car insurance premiums are inflated because of insurance fraud and exacerbated by the number of uninsured drivers on the roads! It is certainly true that in the United Kingdom all car insurance companies are required by law to pay into the Motor Insurance Fund (MIF).

This pool of money was designed to protect and recompense the innocent British public, from damage or injury caused by an increasingly large number of uninsured drivers. and accidents involving untraceable hit and run drivers.

The Motor Insurance fund was set up over sixty years ago, immediately following WW2 when the licensing laws and car insurance regulations were still being formulated and yet many of our modern laws were yet to be put onto the UK statute books.

The war years had seen the number of cars and vehicles in the UK rise exponentially, particularly towards the end of the war after the USA joined in, and for the first time British women were systematically taught to drive in their thousands, and indeed even the Queen, Princess Elizabeth as she was at the time, mucked in with driving vehicles of all shapes and sizes and women drove the domestic war effort.

At the end of the war Britain’s roads were beginning to become cluttered and returning troops and foreign bases exacerbated the number of unlicensed cars and drivers on UK roads without car insurance to record levels.

As the number of accidents involving uninsured drivers rose steadily, public outcry forced the government to act and in 1946 a Government ‘Quango’ called the Motor Insurers Bureau (MIB) was established to oversee the whole operation of public compensation for damage, where no car insurance covered the costs.

The MID is to this day funded by a proportion of every policy sold, and to date has paid out over £2 billion in total. The MID have calculated that the cost to each of us when we purchase car insurance is an additional £15 to £30 per policy to cover uninsured drivers, which amounts to more than £200 million every year.

Furthermore, recent statistics from the Bureau indicate the problem of driving without car insurance has not declined over the intervening years since its foundation, and show that the UK continues to have a very poor record, with one in every twenty cars on the road being driven without proper car insurance cover.

Breaking down the statistics further, reveals that the amount of damage caused by drivers without car insurance each year far exceeds the amount paid out in claims every year through the risk fund.

It is often difficult to receive full compensation even if you have identified the uninsured driver, who may well have been prosecuted by the police, and you make a claim through the MIB.

A satisfied claim, that is those claims that are paid out, usually only occur when a particular claim has run the full course of the law and a judgement handed down.

In a case of a hit and run driver without car insurance who is unidentified, the MIB does not pay all legal costs, which can quickly run into thousands, but merely makes a contribution with a deduction to cover the balance of legal costs and expenses.

Thus the hidden costs and misery caused by the actions of those who choose to drive without car insurance is far greater than the official statistics of two hundred million pounds every year.

It is with these figures in mind that the MIB became the centralised point of a new database, the Motor Insurance Database, created at the turn of the century. The database is updated daily with details of every person and their car, who buys a car insurance policy. This information is now immediately available to all police forces throughout the Country, who through automatic number plate recognition systems, can instantly send a car registration number to the MID.

This allows the system to immediately indicate to a police office in the field, cars that are being driven and the driver has valid car insurance in force.