By Daniel Hunter

A study by AXA Business Insurance among small business owners reveals that insurance fraud is a real issue with one in three admitting they have inflated, or would inflate a claim while one in ten would bend the truth when applying for a policy.

Research carried out by the company among hundreds of small British businesses suggests that, while the majority of businesses are honest, the numbers exaggerating, or even fabricating, claims could run to tens of thousands a year with the average claim value being raised by around 17%, or approximately £640. By clamping down on this behaviour, AXA believes that the insurance industry could save tens of millions of pounds per annum to keep premiums lower.

When asked what they would consider “acceptable” when making a claim, around one in ten small business owners said it was okay to inflate the value of goods stolen and a similar number would lie about having locked up and alarmed their premises.

More seriously, and illustrating the increasing compensation culture in the UK workplace, around one in twenty would consider it acceptable to fake a whiplash claim or a minor accident at work in order to make a claim.

Tradesmen and retailers top the list of sectors where people have exaggerated claims. Although contrary to personal insurance (where men are twice as likely as women to fake a claim), there seems to be no difference between genders when it comes to being sparing with the truth.

Furthermore, the research revealed that small business owners would be 25% more likely to make a fraudulent claim on their business insurance than their personal insurance.

“Many people may think insurance fraud is a victimless crime but it’s not. Honest customers end up footing the bill through higher premiums as insurers pass on the additional costs of inflated claims," Darrell Sansom, managing director at AXA Business Insurance said.

"And in the current economic climate, the last thing any small business needs is additional costs.”

As well as exaggerating claims, some business owners admitted that they would be prepared to tell a few untruths when it came to applying for insurance:

- one in ten said they would deliberately under-value their business to get a lower premium
- a similar number would not mention they used their car for business and simply buy personal cover, again to keep premiums down
- around 5% would not mention previous convictions and 3% would omit to mention previous claims.

“As an industry we are well aware that these things go on and we do have increasingly sophisticated processes in place to stop them," Sansom added.

"However, we also need to educate the minority of small business owners who commit these frauds, whether intentionally or not, that getting caught could mean the end of their livelihood. They not only run the risk of having any claim turned down, but also, in serious instances, they risk criminal proceedings and problems getting any insurance in the future.”