Insurance companies in the USA estimate that private and government insurers paid US$60 billion in 1989 for health insurance claims that were fraudulent or abusive. In 1992 it was estimated that up to £400 million in bogus claims is sought each year in the UK, whether for items that have not been stolen or by inflating the value of what has been destroyed or stolen. It was also estimated that 40% of the fires, leading to £500 million in claims, were fraudulent. In 1993 there was an estimated £400 million of insurance fraud in the UK. In a survey in the UK in 1993 of people seeking advice on pensions, it was reported that 91% were wrongly advised, despite several attempts in 1992 by regulators intent on eliminating mis-selling of personal pensions. Widespread compliance failure by every single category of financial institution involved in selling personal pensions was noted. In 1994 it was reported that in the UK the number of complaints against insurers increased by 46% to 8,000, representing a threefold increase since 1989. A major source of complaint related to life assurance for which 25% of policy-holders alleging maladministration or poor communication. A further 18% were concerned with motor vehicle insurance.
The first function of insurance companies is to help individuals protect themselves from the financial consequences of bad luck. At present they are just about doing their job here. The second area is that they are supposed to help us to save so as to provide for our own security. Here the public is being exploited, in that the redemption values on life insurance policies are far too low.