Giving your right arm for 600,000 euros

Insurance fraud is on the rise in crisis-hit Spain and a new category of defrauder has emerged: those cheating insurers out of pure economic necessity

Josep María Vilamajò has been a private investigator for 40 years and there are now few things that surprise him. However, a recent case left him scratching his head. A year ago, an insurance company hired him to investigate the case of a man who had lost his arm in a car accident. The man said it had been cut by the power saw he was transporting. In the end, solving the case wasn't too difficult: the cut was too clean to have been caused by an accident and a finger on the hand of the amputated arm was in a suspiciously bad state.

The man was from a family in Valencia in which every member was unemployed. They had taken out more than eight insurance policies and together convinced him to amputate an arm in order to get a 600,000-euro payout.

The man went down to his local bar to have a coffee and brandy. Afterwards a local anesthetic was applied and his arm was cut off around the elbow. However, he forgot to remove his wedding ring. He tried to remove it from the hand of the amputated arm, damaging the finger.

It is a brutal, and obviously extreme, case. But it belongs to a new category of fraud that has emerged out of the crisis: fraud performed out of economic necessity. The Zurich group presented a report in March that highlighted the emergence of this new sort of defrauder.

"This type of policyholder now covers a debt or bad results in his business with his insurance," explains Carlos Palos, director of Zurich's accidents claims department. "Claiming compensation becomes a way of getting money," he adds.

According to data from the ICEA, which carries out research for insurance and pension providers, there were 54,114 fraudulent claims in 2003; in 2011, there were 130,959. "Fraud has increased above all in those groups that have most suffered the effects of the crisis: small- and medium-sized companies and young people under 26," notes Francisco Valencia, director of corporate management at Línea Directa.

The rise is also down to the fact that more cases are being investigated, and as such, more fraud appears.

"Insurers have channeled 17 percent more of their resources into investigation," says Javier Fernández, spokesman for the Unespa Employers' Association for Insurance. Companies have strengthened their fraud detection departments - installing software that searches out potential incidences of fraud - but in many cases they still have to call in private investigators.

The tracking of suspected defrauders allows for the recording of images that uncover schemes and permits insurance companies to avoid paying a single euro. Laughing, Vilamajò recalls a much-talked-about case in Seville two years ago. A man supposedly in a catatonic state appeared before a judge in a wheelchair, helped by his family. The judge ordered a video to be projected in the room that had been recorded by an investigator from the Winterman agency. In it, the man in the wheelchair appeared at his holiday home, in a perfect state of health, climbing an olive tree.

Fraud comes in every shape and size. In 2009 a 22-year-old girl alleged she had been bitten by a dog and she could neither set foot in the street nor work because of the phobia of dogs she had developed. The company had to pay her between 70 and 100 euros a day, says Vilamajò, to compensate for lost earnings as a result of the incident. Monitoring her movements, the agency managed to discover that the girl was not only leaving her house without any problems, but, without batting an eyelid, going to work every day - at a canine hair salon. She didn't receive a cent of compensation.

A Facebook photo of two youngsters drinking together uncovered a scheme

The social networks have become a goldmine for helping detectives solve cases. Mariano Paradell, who employs 50 detectives at his agency Grupo Paradell, recalls how a photo on Facebook of two youngsters drinking rum and cokes together helped uncover a scheme. The pair had reported being in an accident involving two cars, each carrying five passengers, at a roundabout. The collision caused nine cases of whiplash, each involving 5,000 euros of compensation - a total of 45,000 euros. They claimed they didn't know each other, but the photograph proved they were in cahoots.

"This occurs every day. [...] Because companies often don't make complaints, and the public prosecutor often doesn't intervene in the matter, it has become the goose that lays the golden egg," says Paradell.

But Zurich's Palos says this is changing. Insurers feel obliged to investigate more and more so-called "insignificant cases" because these are the ones that increase most notably during times of crisis.

The type of case is changing, however. "Fewer fictitious sick leave cases are being investigated," says Paradell. "People don't dare do anything stupid so as not to lose their job."

But the number of fires at companies who are keen to save what they can via a compensation payout is on the rise. Vilamajò says his agency is investigating a case involving four fires at Chinese-run shops, whose owners have found the formula for "sorting out their departure." They burn down the store, receive the payout and leave a country that, economically, is now no longer what it was.