October big question: Is the industry collaborating enough to combat fraud?

Mark Allen, manager of fraud and financial crime, ABI

Collaboration is the key to tackling fraud - from keeping track of and tackling emerging fraud trends, to reminding consumers of the long-lasting and serious consequences.

Fraudsters are increasingly sophisticated and highly mobile, and no one insurer or organisation can effectively address this problem.

This is why the industry works closely with the IFB, invested in establishing IFED, and continues to implement the wide-ranging recommendations made by the Insurance Fraud Taskforce.”

Tom Gardiner, head of fraud, Aviva

The appetite for and level of collaboration across the industry is significantly improved, and the new General Insurance Fraud Committee should be an effective mechanism for coordinating industry focus and resources.

However, there is still scope for improvement - notably in three key areas: the threat of data farming, getting more insurers signed up to existing industry initiatives, and improving focus on fraud across non-GI products.

the industry’s response must remain relevant to a changing fraud landscape: digital, political change and the whiplash reforms can impact on the nature of the fraud threat we face, and we must remain vigilant. Wider collaboration across private and public sectors and markets offers a further step change in the fight against fraud.

Donna Scully, director, Carpenters Group

Although progress has been made in tackling fraud more collaboratively, I fear the proposed Whiplash Reforms threaten to reverse a lot of that progress by opening the floodgates to CMCs, McKenzie Friends & unregulated entities. This will undoubtedly increase gaming and fraud. We know that from bitter experience.

 

Neil Thomas, director of investigative services, Accident Exchange Group of companies

Motorists expect everyone in the insurance industry - whether they be brokers, insurers, credit hire providers or law firms - to collaborate and help protect them.

Can we all tackle fraud in isolation? Probably - but imagine how strong we could be if we had true cross-industry collaboration with a common goal of tacking fraud wherever it appears in the supply chain.

Cate Wright, director, No Office Walls

We are yet to achieve industry-wide collaboration, I believe our greatest defence against fraud is a united front, so this is a concern. Whilst there are some great examples of successful collaboration in the industry, we still lack an industry-wide best practice and a truly industry-wide collaborative approach.

One of the biggest barriers is how we measure success. Whilst an individual company’s return on investment and reduction in fraud losses is important, more focus should be put on each individual company’s contribution towards the industries fight against fraud, including reciprocal sharing of counter-fraud data and contribution to best practise discussions.

Nicholas Kelsall, fraud manager, Allianz

In recent years collaboration across the industry has developed substantially. Counter fraud initiatives such as the IFB have played a significant role in improving that the industry works together.

Collaboration amongst insurers is better than it has been, but there’s always more that can be done. The claims landscape is constantly changing and using big data to drive detection is key. Historically, there’s been a focus on motor which has proven successful, however with advances in technology, fraudsters are using more sophisticated techniques meaning that there’s more opportunities for the industry to come together to identify them.

Insurance fraudsters are criminals and should be treated as such, therefore it’s crucial that identifying and fighting fraud should not be seen as a competitive advantage between insurers. 

Matthew Maxwell Scott, director, Access to Justice

Only a generous commentator would say insurers are tackling fraud as effectively as they might or acting in completely good faith.

In part, this is because joint efforts have come about relatively recently. The IFB was established just 12 years ago, so it is fair to say the industry is playing catch up.

The insurance industry does itself no favours, deliberately conflating ‘proven’ with ‘suspected’ fraud in order to inflate the data and use them as a lobbying tool. This is unhelpful, because to know what successful collaboration looks like, we must know the true extent of the issue. Greater transparency and a more credible approach to insurance fraud statistics are overdue and could help address the industry’s trust deficit as well.

Steve Crystal, head of financial crime, Sedgwick

I think the industry is still on a journey, but I’m seeing positive signs and developments that give me cause for optimism.

An area of focus for our industry must be what I refer to as ‘database overload’. We have a plethora of tried and trusted databases, so the foundations are in place, but I find inconsistency when it comes to following industry definitions, as well as a lack of using some of the databases properly.

We would all be far more collaborative and productive if we could tackle some of the issues in this area – especially against a backdrop of more identity theft making it easier to falsify applications for insurance.

IFED has been another positive development in terms of collaboration – they’ve welcomed consultation and engagement with specialist investigation service providers like Sedgwick.

I realise fraud can be a broad, complex issue at times, and insurers and their investigation partners must tread carefully when collaborating. We’re not there yet, far from it, but there are encouraging signs and examples of progress in the right direction.

Paul Burke, head of the special investigation unit, QuestGates

Progress is being made. The IFB “affiliate” model is a great start but to be completely effective, there needs to be a widespread membership and the benefits have to outweigh the cost of joining.

There is an urgent need for a centralised multi-facetted platform that can identify the fraudster who looks to claim across all product lines and which can be used by all parts of the chain.

For such a platform to be effective, however, there has to be a consistent approach in how fraudulent claims are handled and the quality and accuracy of the data that is shared. As different companies have segmented views of fraud, the likelihood of individual product departments having different objectives and targets, and varying abilities when it comes to capturing fraud data, therein lies the challenge to overcome should such a platform be developed.

Lorraine Carolan, national head of counter fraud, DWF

The insurance industry has made huge strides in collaborating to combat fraud. With the advent of the IFB and IFED, this was undoubtedly a step in the right direction and both organisations success in disrupting multiple organised fraud networks is evidence of how far the insurance industry has come.

Additionally, there has been a real appetite amongst insurers to come together in various industry forums to discuss emerging issues around fraud threats and to look at how these can be combatted.

Insurers have also made a key investment in data analytics and profiling which have added significant insight into traditional intelligence and have been prepared to share that information via forums to once again combat fraud.’

Sarah Hill, Partner, BLM

The UK insurance market is seen globally as a leading light when it comes to tackling the problem of insurance fraud. Collaboration has been pivotal to that success with solutions and initiatives born out of this: from the setting up of the IFB to support collective data sharing, to IFED.

Working together, the industry has made government both consider solutions and take note.

We are entering a new era of insurance fraud, with much more needing to be done. As fraudsters evolve and change, new players enter the market, new models emerge and challenge traditional insurance fraud identification methods; fraudsters migrate into new areas of insurance fraud. The industry needs to be on its game more than ever before.

 

William Pritchett, head of insurtech, KPMG UK

As insurance increasingly becomes a digital proposition, collaboration on insurtech solutions using artificial intelligence to detect online fraud reduction will become ever more crucial. Firms providing this service are already gaining investment and starting to expand as online fraud continues to be a growing risk that insurers recognise they have to mitigate against. We advise insurers to prepare for when, not if, online fraud and other cyber issues will affect them.

Fundamentally, all areas of the insurance sector that can be bought online are vulnerable to fraud, but most at risk are those that leave more fields open to customer opinion or interpretation.

Detective superintendent Peter Ratcliffe of the City of London Police’s Economic Crime Directorate

IFED continues to work effectively with the insurance industry to tackle insurance fraud and create a hostile environment for both opportunistic fraudsters and Organised Crime Groups (OCGS). IFED has an agreed referral process in place with the insurance industry, and as such, insurers share vital evidence and intelligence to the unit to assist our officers at the start of their investigation and throughout.

As well as our joint efforts in prosecuting those who perpetrate and facilitate insurance fraud, IFED also works with the insurance industry to raise awareness about insurance fraud and develop robust prevention strategies. Since IFED’s inception in 2012, the unit’s ongoing collaboration with the insurance industry has led to 420 convictions, including 187.5 years in custodial sentences.

Mike Swanborough, CEO, Aioi Nissay Dowa Insurance

The ABI’s recent figures clearly evidence the continued presence of fraud within the industry. An 8% annual decrease in the number of dishonest claims is a positive step but the increase in the value of these claims leaves significant room for improvement across the industry.

As these figures show, insurance fraud costs the industry billions every year and this increases premiums for honest policyholders. At insurethebox, we believe in pricing insurance for each individual driver based on how they drive. If motorists are driving safely, they should not be punished with the increases to premiums that are a result of insurance fraud. Because of this, we welcome all methods for reducing fraud across the industry.

Whether it be a ‘crash for cash’ scam or an exaggerated claim, it is the responsibility of the industry as a whole to tackle this threat. An 8% decrease is a promising start but to see this decrease further we need the effort to be industry-wide and make use of all the tools that we have available.

Dr Matthew Connell, director of Policy and Public Affairs at the Chartered Insurance Institute

Combating fraud is a vital element of maintaining public trust in insurance - if consumers feel that their premiums are subsidising fraud, they will be less willing to take out vital cover.

The insurance sector is collaborating to combat fraud, not least through the actions set out in the 2016 Insurance Fraud Taskforce report.

One conclusion reached by the Taskforce was: ‘The incorrect perception that this crime [of insurance fraud] is victimless is reinforced by the negative public views of the insurance industry, with news stories of bad customer experiences given prominence in the media.

The CII is working closely with members and chartered firms to address this issue of public trust, for example with the publication of our public trust index in July, which aims to identify the drivers of public trust, and practical measures that the sector can take to improve trust.

The sheer scale and challenge of fraud faced by motor insurance providers is well documented by the ABI, but for insurance providers to combat the issue it is essential that a holistic view is taken when looking at fraud, from the identity of named drivers as well as policyholders – particularly as the point of quote. Intelligent use of data and analytics, along with the use of contributory databases plays a fundamental role as the ABI identified the cases of confirmed or suspected application fraud.

James Burton, Director of Product Management, Insurance, UK and Ireland, LexisNexis Risk Solutions

Understandably, identifying when and how data has been manipulated at the point of quote and identifying named driver risk has been a key focus for the insurance sector over the past few years. In turn, the analysis of online quoting history associated with policyholders and named drivers gathered from across the market is providing a solution for insurers. Quote manipulation is an indicator of higher claims risk so knowing, at point of quote that the information provided for that quote has been changed and to what degree, enables insurance providers to make more informed decisions about the proposed risk and helps to reduce their exposure to fraud.

In a study we conducted of motor insurance policyholders, as many as 29% of people admitted to ‘fronting’, i.e. naming someone else as the main driver on their insurance policy to reduce their premiums, potentially invalidating their cover. 43% stated they believe it is acceptable to misrepresent data in some form in their insurance application or claim and 55% of drivers believe an insurer should still pay out on a claim, even once it has been found to contain false information.