Educating consumers to stop seeing insurance as a grudge purchase would go some way to cutting fraud. But so too might be pointing out the consequences of a conviction
DCI Craig Mullish, of the City of London’s Insurance Fraud Enforcement Department (IFED) has urged insurers to take part in a nationwide campaign to improve the reputation of insurance, which will help them implement preventative measures more effectively.
At the Insurance Times Fraud Charter meeting at the Devonshire Club in London last month, Mullish told the table of fraud specialists that “prevention is always better than cure”.
He said: “From cases I have worked on, customers still view insurance as a grudge purchase. Maybe we need a national campaign from insurers to smooth the edges of the reputational struggles, with fraud prevention measures included.”
Insurers around the table agreed that collective action is needed, and that customers still see insurance as an opportunity to get a return on an investment.
Donna Scully, director of Fraud Charter sponsors, Carpenters Group said: “I have had a woman come to me for a claim and wanted to inflate it and make it the biggest she could, because she hadn’t made a claim for 10 years.”
Mullish did, however, express a level of frustration at the sometimes lenient judgements passed down onto fraudsters, and suggested the industry could do more to change this.
“A caution isn’t what we are after of course, we are hoping for a prosecution. We want to send the message out with the sentencing that this will not be tolerated, but that is something that is out of our control.
“Judges do get the victim statements, so they do see the impact that it causes. The industry could do more in lobbying the judiciary.”
‘30% of our workload is about organised fraud and 70% is about opportunistic. We can’t ignore one side because they are both harmful’
Craig Mullish, IFED
Mullish, however, suggested warning consumers of the other consequences of being convicted could serve as an effective deterrent.
A “small sentence” might not be the result IFED was looking for, and it may be seen as lenient in the eye of the public, however other consequences, ones that the public might not be aware of, could be the key to deterring.
Mullish said: “There are a lot of other ramifications of being convicted and that is what we have to get across to those who might be tempted.
“Such as not being allowed to travel to America, not being able to get a loan, things like that.”
Cate Wright, global insurance product manager at BAE Systems, said this was “definitely something we need to be pushing. If they are caught committing fraud, they won’t be able to take their kids on that holiday to Florida.”
What IFED wants
Following Insurance Times revealing that IFED has reviewed its referral process and may be forced to scale back the number of cases it handles, Mullish outlined what insurers must consider before forwarding submissions to the unit.
He said: “The cases that we take on will reflect the threat and the risk to the industry it poses.
“We will definitely still go for those tier one risks, but we cannot ignore the tier two and three because we don’t want those coming up and becoming more of a threat.
“What we want to know from you when referring to us is: what evidence do you have? Has the case gone through civil litigation? We need to understand that because that could have implications for taking the case further.
“We want to know how old the case is, because information and evidence can go missing depending on the age of the case. And leave out the hearsay.”
But Mullish said that even if this advice is followed, resource restrictions at the unit could result in the case being rejected anyway.
“Of course, every company has a limit to its resources. As much as we would like to take on every case, there may be a time where we simply cannot because we are at capacity.”
He urged insurers at the table to “continue to refer,” but to be aware any action will be in line with the threat assessment and IFED’s capacity.
Stephen Dalton, Insurance Fraud Bureau (IFB) head of intelligence, said that the IFB is looking at alternative ways to stamp out fraud both at an opportunistic and organised level.
“We need to use the regulatory framework more to disrupt these potential fraudsters,” he said. “It might not lead to a criminal conviction, but it is disrupting the behaviour.
“The IFB is looking at alternative avenues. I know we have resource constraints, but so does everyone.
“So we are looking at working with regulators more closely. Private prosecution is another thing we are considering.”
Jason Potter, head of fraud operations at law firm BLM, and previously at the IFB, suggested the bureau should act as a liaison group between insurers and IFED. But Mullish dismissed this idea.
Potter then questioned whether IFED needed to focus its attention more narrowly, and have a clearer industry remit, whether focusing solely on organised crime or opportunistic fraud.
But Mullish said that the unit was there to service the whole industry, with various stakeholders, all with different preferences.
“Our different stakeholders will want different things tackled,” he said. “One insurer might want us to tackle opportunism, whereas another may want us to tackle the organised side. Both insurers pay in.
“I would say 30% of our workload is about organised fraud and 70% is opportunistic. We can’t ignore one side because they are both harmful. Our strategy is to have a healthy split.”
LiP portal testing to start in October
One piece of good news for the table was that progress is being made on the Litigants in Person (LiP) portal.
At the previous Fraud Charter meeting in November, Medco’s Susan Brown said that there had been little to no progress, as the Motor Insurance Bureau and Medco were awaiting for Ministry of Justice responses to questions.
But Brown was now able to say that “progress is being made”.
She said: “We had another event a few weeks ago. They are clearly making progress. They have started the development process of the portal.
“Decisions are still to be made. We may see a website and a more open channel of communication from the MIB soon.”
She then confirmed that two technology partners have been appointed and were helping the MIB with building the portal.
David Parkin, deputy director for civil justice and law at the MoJ confirmed that six months of tests on the portal would begin in October, until April next year when the reforms come into effect.
Minimum viable product
Brown said that while the portal is being built, it will be a “minimum viable product (MVP),” which hasn’t given insurers much confidence.
Nick Kelsall, head of fraud at Allianz made clear his frustration with the lack of communication and the implications that has caused.
He said: “I wanted the LiP to be fully end to end, liability in and out, and it hasn’t been fully decided, so there is uncertainty around that, and this uncertainty is making it difficult for us to plan for what it is going to look like.”
However, Cate Wright of BAE said the agile nature of the build, allowing changes to be made at any time, meant the approach is ideal.
“If it is being developed under an agile basis, then an MVP is probably the right way to go,” she said.
“You can maybe fail fast and learn quickly from those. As long as that agile basis carries on, then I think that is the right way to go.”
Concern over CMCs
Another ongoing Fraud Charter concern was the role of claims management companies (CMCs) when they are allowed access to the portal.
The FCA took charge of CMC regulation this month. FCA technical specialist Barbara Kubis-Labiak told the group that measures previously announced in the consultation paper were being brought forward and were due to come into force on 1 April.
She also said that the FCA is going to do all it can to “empower consumers” and encourage them to claim by themselves, rather than seeking aid from CMCs.
She then revealed that 900 – more than 80% – of UK CMCs had applied for temporary permissions since the start of the year.
“That doesn’t mean these will all be authorised, and it doesn’t mean they will all seek authorisation.
“But they will all be invoiced and will still have to go through an authorisation process if they want permanent authorisation. There is a lot they have to tell us, such as their marketing strategy and how they will deal with customers.”
She said that while “every sector has at least one firm signed up for permissions”, it is led by financial services and personal injury specialists.
However, she said that while the FCA would not list the 130 firms that had not yet signed up, it is aware of who they are.
“We are working very closely with our unauthorised business department and are well prepared for whatever problems may arise.”
Part two to be published this year
Finally, Parkin announced that part two of the reforms will aim to be announced by year-end.
He said: “The government has taken a major piece of legislation [the Civil Liability Act] through parliament. Part two has not been published. We would hope to publish the government response to part two by the end of the year.
“But, at the moment, we are helping with the build of the portal, along with other things.
“There are going to be more consultations and meetings to talk about things and concerns that other have. I know some thought credit hire was a bigger problem than whiplash, which we have dealt with. It is on our radar, our business agenda, but there is still a lot to be done.”