UK insurers to fund police anti-fraud unit

Britain's insurers have agreed to pay 9 million pounds ($14.4 million) to fund a new police unit dedicated to combating insurance fraud as the industry grapples with rising bogus claims, City of London police said on Tuesday.

The 35-strong force is tasked with tackling a crime that costs the insurance industry 2 billion pounds a year, adding 44 pounds to the average consumer's premium payments, according to the Association of British Insurers (ABI).

An ABI spokesman said figures for 2009, the most recent available, showed that between 4 and 5 percent of insurance claims were fraudulent, an increase on the previous year.

Insurance fraud typically rises during economic downturns as cash-strapped individuals and businesses seek to bolster their income by filing exaggerated or wholly fictitious claims.

Some of the recent increase in insurance fraud could also reflect improved detection rates, the ABI spokesman said.

The new police unit will form part of the economic crime directorate of the City of London police, which oversees the capital's financial district, and will be up and running in January 2012.

The anti-fraud force will cost ABI members 2.9 million pounds a year for the next three years, a City of London Police spokesman said, and will be reviewed after two years.

The unit will complement the efforts of major British insurers' in-house fraud detection teams, which are often staffed by former police officers.

RSA , Britain's biggest commercial insurer, employs about 20 ex-officers on its anti-fraud team, a company spokesman said. ($1 = 0.624 British Pounds) (Reporting by Myles Neligan)