Insurance companies should be careful they only employ private investigators that operate to high standards and within the law, says the Association of British insurers.

The ABI has worked with the Information Commissioner’s Office and the private investigator (PI) industry to publish guidelines on the use of PIs by insurers when investigating potentially fraudulent claims.

The guidance covers when an insurer should consider using a PI, the importance of a formal agreement between the insurer and investigator and the information that the insurer needs from the PI to come to a conclusion.

It also explains who has the right to see the information collected by the PI and how long it should be kept by the insurer.

Stephen Haddrill, director general for the ABI, said: ‘People rightly want to protect their privacy. Insurers need to balance this with the need to expose cheating policyholders.

‘On occasions an insurer may need to use a private investigator if they suspect a claim is fraudulent. And insurers may sometimes use tracing agents to find people who are due payouts from old policies.’