The ABI said fraud was "more of a temptation" during a recession.
While detection of fraud has risen, the group also suspected that the actual amount of fraudulent claims for motor and household insurance had also increased.
Fraudulent claims were most common on home insurance, with 55,000 false or exaggerated claims detected last year.
False motor insurance claims were the highest by value, at £360m ($540.8m). One of these cases involved an owner who reported his car stolen from a car park. Later, he admitted he had pushed the car over the cliff and planned to use the insurance payout to pay off his debts, the ABI said.
"Fraud thrives in a recession, so insurers are intensifying their crackdown on insurance cheats," said Nick Starling, the ABI's director of insurance.
"Fraud adds an extra £40 ($60.50) a year to the average premium, which is why the harder we make it for the cheats, the more competitive premiums will be for honest customers."
Detected fraud stood at £260m when the ABI first collected figures in 2004, rising to £410m the following year, up to £470m in 2006 and then rising again to £560m in 2007.