UK insurance companies are planning to fund a specialist police force dedicated to taking action against the major problem of insurance fraud which costs an estimated £2 billion per year and increases the cost of insurance for consumers.

A new unit of 35 specialist staff will join the City of London police’s economic crime directorate and focus on stopping fraudsters and organised criminals who stage ‘cash-for-crash’ accidents as highlighted in the BBC’s edition of Panorama last night (July 11th) entitled ‘The Great Car Insurance Swindle.’

Members of the Association of British Insurers (ABI) will spend £8.2 million to fund the unit for three years. The measure, coming at a time when the Metropolitan police force are having to make cuts of around twenty per cent, is being presented as an opportunity for banks and insurance companies to make investments to help their own interests.

A strategic board including members from the ABI, the Insurance Fraud Bureau and the City of London Police will meet quarterly to set priorities for the unit and to review progress. The police will remain independent in any enquiries that are undertaken.

The insurance industry said that around four per cent of claims were fraudulent in 2009; double the amount from five years previous. Insurance fraud adds an average of £44 to the cost of each insurance premium in the UK.

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