Fraudulent claims on the rise

When the economy goes into recession, cases of insurance fraud shoot up. Industry specialists for the art world say they are watching contemporary dealers particularly closely The insurance industry is on red alert. The number of fraudulent claims is rising rapidly and experts predict they will continue to increase until the economic situation improves. According to the Association of British Insurers (ABI), in 2008 there was a 17% rise in fraudulent claims compared with the previous year. This amounted to 2,000 dishonest claims made in Britain every week. The total value of these in 2008 was £730m—30% up on 2007.

Claims for lost or damaged art for cash have increased.
Most cases of art insurance fraud are not so straightforward and cases of fake theft and loss are relatively rare.
Another difficulty for the art insurance industry is that dealers and collectors are cutting costs dramatically.
Another common problem is the exaggeration of a work’s value when it has been lost or damaged.
The “negotiations” between insurer and claimant are particularly fraught when dealing with contemporary works that have dropped significantly in value in the past 18 months; a collector may be seeking to claim insurance for a work based on a pre-recession value.
One of the most ambitious types of art fraud involves attempts to secure insurance for minor works that are presented as masterpieces with huge valuations, usually in excess of £20m.
The recession will lead to more individuals seeking insurance for art to obtain additional credit.
There is this story of a collector in Europe who claimed to own a 19th-century painting worth seven figures. This had been authenticated and valued by a South American expert. The work was rejected by several insurers but accepted as authentic by a European firm and duly insured. It was “stolen” shortly afterwards.