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In 2006, Luton in Bedfordshire was seen by police as a hot spot for so-called "cash for crash" insurance fraud, but six years later members of a gang responsible for a £5.3m scam are in jail.

The police investigation saw 39 defendants appear at crown court in separate hearings over three years.

'Cash for crash' Luton gang smashed after five-year probe
15 April 2011 Last updated at 14:41

In 2006, Luton in Bedfordshire was seen by police as a hot spot for so-called "cash for crash" insurance fraud, but six years later members of a gang responsible for a £5.3m scam are in jail.

The Luton-based ring engineered crashes involving unsuspecting motorists as well as making bogus and inflated personal injury insurance claims.
Police came across the insurance fraud while they were investigating organised criminal activity in the town.
With the Insurance Fraud Bureau, they uncovered a web of deceit involving people from professions including the legal, medical and motor trade.
During the police operation, homes in Bedfordshire, Hertfordshire and Berkshire were raided.
The car insurance fraud centred on an accident management company based in Leagrave Road in Luton.
The gang also used land at a farm to the north of the town to store the damaged vehicles.
The police investigation saw 39 defendants appear at crown court in separate hearings over three years.

'National problem'
Three of the final four were found guilty on Thursday at Luton Crown Court of conspiracy to defraud.
Kamsan Mahmood, 42 of Long Meadow Farm, Chalton, Istafa Hussain, 35, of Lincoln Road, Luton, and Peter Charlery, 45, of Long Meadow Farm, Chalton, have been remanded in custody to be sentenced at Luton Crown Court on 27 April.

Irtiza Fazal, 40, of Lincoln Road, was acquitted by the jury after a seven-week trial.
Thirty three defendants pleaded guilty and two others were convicted at earlier trials.
Those court proceedings could not be reported until now because of legal reasons.
At the start of one of the trials Prosecutor David Farrell QC said: "The term used for this fraud is cash for crash. It has become a national problem but had particular hot spots, Luton being one of them."

Bedfordshire's assistant chief constable Andrew Richer said: "In 2006 Luton was a known hot spot for offences, also known as 'cash for crash', but in 2011 that is no longer the case.
"The case had grown considerably in size and complexity since the initial lines of investigation were pursued in May 2006.
"This was a calculated and systematic fraud perpetrated on numerous victims."

After Thursday's hearing Glen Marr, director of the Insurance Fraud Bureau, said: "The fraud is estimated to cost the industry £1.9bn a year and that adds on average £44 to every policy holder's annual insurance premium.
"We will continue to find, pursue and expose criminals involved in organised insurance fraud.
"The message is loud and clear - seek to defraud an insurer and you risk serious repercussions and seizure of assets."

It has always seemed to me that, one an Insurance Company accepts liability, they spend money like drunken sailors.

That is an unfortunate but inevitable consequence of having a policy that forces people to pay premiums to private, profit driven companies.

I would have thought that a private profit driven insurance company would want to reduce its payments below what the claimant asked for rather than inflating them fourfold.

There seems to be a mix up between: 'people paying premiums to insurance companies' and 'insurance companies paying out compensation to people'.

Sorry old chap, not reading your banter. I would expect any profit driven organisation to
1) Maximise its income. Which, in the free market which exists for insurance, is limited by competition.
2) Minimise its outgoings. Which, patently isn't done by choosing the more expensive bidder.

However, I would absolutely a group of profit-driven organisations, whose overall income is guaranteed by law, to ‘spend money like drunken sailors’, then use that as an excuse to charge higher premiums.

Either way, I’m convinced their behaviour is the unfortunate but inevitable consequence of having a policy that forces people to pay premiums to private, profit driven companies. These companies can't lose, no matter how much they extract the urine!

It is the number of clients not the overall income of the group is guaranteed by law.

The distribution of those clients between members of the group is subject to the normal competitive advantage.

Of course an individual company can loose. If it sets its premiums too high or fails to control its expenditure it will eventually have to cease trading. Even non profit driven, mutual companies are subject to the same economic imperatives.

Unlike companies in other sectors, the consumer must purchase that product.

If KFC, Macdonalds, Burger King, etc started charging £30 for their meals, quite simply no one would buy them.

Do you now understand how the "same economic imperatives" do not hold? If not, then please explain how.

There are many sectors of industry where the consumer must purchase the product if they are to lead a normal life. Shoes, spectacles, housing, clothes and food

and the provision of services such as car insurance are subject to the same rules.

You replied " I would absolutely expect a group of profit-driven organisations, whose overall income is guaranteed by law, to ‘spend money like drunken sailors’, then use that as an excuse to charge higher premiums" Yet very much the same thing happened with my property insurance where the company insisted on some very expensive underpinning even though two surveyors insisted it was not necessary. The fact that a company which does not have its custom guaranteed by statute behaves in an identical way to one that doesn't have such a guarantee suggests to me that the statutory guarantee is no part of the reason for that behaviour.

Steve

Most of your arguments are quite specious. The vendors of car insurance operate within the same economic paradigm as the vendors of everything telse. The fact that it is mandatory for car drivers to purchase insurance in no way distorts the market. It might create the market - and that is debatable - but it does not influence its operation. If you think that it does please explain in detail exactly how

[I have already explained as much as I consider reasonable.

Like I said: national KSI rates are ever reducing, yet premiums are ever rocketing.

I vehemently disagree that outlay being mandatory/discretionary doesn't affect how suppliers react, and I have been given no argument (that has withstood scrutiny) that supports your opinions or that counters mine,

You have explained nothing. You have stated, as a matter of fact, that legally mandated purchases follow a different economic model to non mandated but necessary purchases. You have not, and cannot, justify that statement in terms that would be understandable to anyone versed in economic theory.

That would be a problem if a) premiums really were rocketing.

Our premiums have fallen over the last few years.

The cost of compensating each accident is rising.

And insurance also pays for repairs to damaged cars and it is no secret that modern construction makes the cost of repairing vehicles increase yearly.

Which is, effectively, that car insurance is not subject to normal market forces because you cannot choose whether or not to buy that insurance (which is in itself an inaccurate statement).

I countered that you cannot choose whether or not to eat but that the free market still operates very well in the grocery sector.

So please explain to me why the car insurance market is different to the grocery market.

What was it you corrected me on ... : "the number of clients [of the group] is guaranteed by law.", which I believe doesn't apply to shoes, houses, clothes, etc - yes? Is that differentiation enough to affect the economic model? If your answer is "no" then just say so and we'll let the reader decide for themselves.

Was that "stated, as a matter of fact" ?

The correct statement is: you cannot legally choose whether or not to have insurance.

Conversely, you can legally choose whether or not to buy ... food

Your description of insurance companies "spend money like drunken sailors" does suggest they are in a comfortable position - not something you would expect from those in real competition.