Why it's not a good idea to tell your insurers you had a Picasso in the downstairs loo

Have you been burgled and put in an insurance claim for a few extra items that weren't really stolen? You are not alone. Almost half of the population has thought about making a fraudulent insurance claim. But Britain's insurers are now fighting back against the scams which cost them £1bn a year.

Yesterday HBOS, the country's largest mortgage lender, revealed it is going to try out lie detector tests to expose policyholders who exaggerate the extent of their losses or make up claims altogether.

The bank will become the first to use voice-stress testing analysis to help detect whether customers are putting in false claims.

Callers to its claims centres will have their voices monitored by the sort of sophisticated technology more usually associated with detective novels or the intelligence services. The computer aims to flag up possible fraudulent claims by monitoring nuances in the voice.

Research by the Association of British Insurers, the industry body, might explain why insurers are looking at new ways to pinpoint potential fraudsters.

The ABI estimates that the cost of fraudulent motor and household insurance claims is more than £20m a week. In a recent survey, 7% of people - equivalent to 3 million policyholders - admitted making a fraudulent insurance claim, while nearly half of those in its survey of 2,000 adults would not rule out making a fraudulent claim in the future.

Fraudsters, who are most likely to be male, married and in full-time work, regard the offence as on a par with stealing towels from hotel rooms, according to the survey.

Some 30% of fraudsters justified their claim on the basis that most other people were doing it, while 28% reckoned it did not harm anyone personally. But the industry strongly disputes that defrauding insurers is a victimless crime, because honest policyholders pay by facing overall higher premiums.

"If we can reduce the number of fraudulent claims we can keep the premium levels low," HBOS said yesterday. "The intention is to try to reduce the levels of fraudulent claims which cost the industry over £1bn a year."

HBOS, which has 2 million policyholders, insisted yesterday that the new voice-stress tests would not be used in isolation from its other detection methods. It plans to begin a three-month pilot scheme from next month, using a few hundred claims. Customers would be informed if the system was being used.

"Policyholders with honest claims have nothing to fear from it," HBOS said.

Voice-stress testing has so far been tried out only in the motor industry, most prominently by Highway Insurance, which is using the same technology.

Kerry Furber, a fraud management consultant to Highway and the managing director of Digilog, the software marketing company being used by HBOS, said that Highway's use of the voice-stress technology had produced "very significant" results. Of 4,000 claims processed under the technology, around 18% had been prevented from proceeding thanks to the technology - a level of prevention that exceeded even the 10% of claims that the ABI estimates to be fraudulent, he added.

It is understood that other major insurance companies are looking into trials of the technology.

The Admiral motor insurance group, which has 750,000 policyholders, began to use lie detector techniques in May as part of a pilot scheme. "There's a good chance of us continuing with it," a spokesman said, pointing to an increased number of policyholders who had withdrawn claims on their motor policies.

But the experience of voice-stress testing has not been successful for everyone. Direct Line, the "little red phone" group owned by Royal Bank of Scotland, tried out similar technology last year but decided against implementing it.

"It was predictive and not conclusive and you need something that's entirely conclusive," a spokesman said.

Meanwhile Norwich Union, part of the Aviva group and the country's largest general insurer, insisted yesterday that it had no plans to try out the technology for its household policies.

Civil rights


The civil rights group, Liberty, has also raised questions about the use of lie detectors. "I don't think there's a scientist alive who believes lie detector tests are true. It's so unreliable," a spokesman said.

He added the use of tests raised questions about what the companies intended to do with the voice-stress material once it had been collected and whether customers who had proved their innocence would be able to have their records cleared.

The financial ombudsman, the complaints handling service for the financial services sector, made it clear yesterday that insurers' could not reject claims solely on the use of lie detector tests.

In the past, however, the ombudsman has proved its willingness to back up insurers' attempts to tackle fraudsters. It threw out two claims by people who had exaggerated or lied about their claims. One had claimed his DVD player and 14 DVDs had been stolen when he never owned them in the first place and a man who had claimed disability had been found to be lifting heavy shopping and driving long distances.

But, if lie detector tests help root out such fraudsters, it might help the insurers in their goal of fraud prevention. The ABI found that 40% would not commit insurance fraud if they thought they would be found out by their insurance company.

Bogus claims you couldn't make up


· A woman claimed five times for the loss of the same eye, giving explanations ranging from an attack to an injury sustained while jumping into a swimming pool

· A holidaymaker claimed for having the cost of having his appendix taken out while on holiday. He had done so on eight previous occasions

· A man claiming for recuperation costs after suffering a heart attack was found to have presented a bill for a local brothel

· A policyholder told the police of a burglary the day before the alleged incident took place
· A policyholder's 'stolen' car was found at the bottom of a cliff with no sign of forced entry. He admitted he had pushed it over to pay off debts

· A claim for replacing a lounge suite following accidental spillage of paint was rejected when forensic tests showed the paint was deliberately applied

Source: Association of British Insurers