Tackling opportunistic fraud requires ‘a measured approach’

The profile of those committing insurance fraud has continued to adapt in relation to external influences, but it is the job of counter fraud teams in the insurance sector to stay abreast of these developments.

A collection of top counter fraud experts attending last month’s Fraud Charter roundtable (21 March 2024) – hosted by Insurance Times and sponsored by law firm Carpenters Group – explained that it was only through constant monitoring that insurance firms could hope to keep up with an increasing tide of opportunistic fraud. 

Commenting on the shifting profile of those committing fraud, Carpenters Group director and Fraud Charter co-chair Donna Scully said: “What we’re all seeing is that profile becoming more sophisticated, certainly in terms of scams and phishing – they’re just getting better.”

Scully added, however, that while this type of professional fraud was becoming more prevalent, there was a concurrent rise in opportunistic fraud, where individuals were taking advantage of legitimate situations to make false or exaggerated claims for financial gain.

She explained: ”The cost of living crisis is continuing and opportunistic fraud is definitely a really big issue that’s on the increase. 

“It’s always going to be there, but we have to be really alert to it and where we’ve started to use fraud checks on the claims side, we have to be more sophisticated and look harder.” 

Some of this extra vigilance is necessary because, as the profile of the professional fraudster evolves, the profile of customer that is committing opportunistic fraud is also changing. 

Scully explained: ”We had a picture in our mind before the cost of living crisis and Covid [of who would commit opportunistic fraud], but now it is often someone who you wouldn’t previously expect – having a professional job, for example, doesn’t rule someone out.” 

Paul Holmes, partner at legal services firm DWF, agreed, noting that professionals such as “dentists and general practitioners” had been caught exaggerating claims and committing opportunistic fraud.

Ami North, Tesco Underwriting’s head of personal injury and fraud, echoed Scully’s comments. She added: ”The cost of living crisis is starting to make people make decisions they wouldn’t have made before. 

“Certainly, there’s been an increase in staged, high value jewellery claims and other exaggerated genuine incidents.” 

Different strokes, different folks

While counter fraud experts will be well aware of the link between economic hardship and levels of opportunistic fraud because of historical trends, the methods of identifying, mitigating and preventing this type of fraud require constant updating. 

For example, where opportunistic fraud is concerned, it is not appropriate or expedient to involve law enforcement in every case. 

North explained: ”I’ve heard some suggest that we refer every case [to law enforcement], but that wouldn’t be the right thing. We really need to think about what sanction is the right sanction because it’s about a measured approach.” 

Mark Allen, chief fraud and financial crime officer at the ABI, echoed this point, adding that different strategies were pertinent for different profiles of fraudster. 

He explained: ”The underlying spectrum for behaviour is still the same – you have opportunistic fraud on one end and organised [fraud] on the other. But what it boils down to is how you influence and sway the behaviour of these different types of fraudster.

”You can sway the opportunists with awareness campaigns and publicising outcomes, whereas the only way you can disrupt organised criminals who do this for a living is by depriving [them] of their lifestyle – whether it be putting them behind bars or confiscating their assets.” 

Because opportunistic fraud is typically committed by those without criminal expertise, the counter fraud experts attending the Fraud Charter explained that it was more simple to detect and protect against. 

Scully said: ”The thing about these one-off opportunistic fraudsters is that they’re not good at it like real fraudsters are, so they’re quite easy to catch. Each of those people doing it don’t realise that everyone else is at it.” 

Strategies and challenges

So, what strategies are being deployed to combat the rising tide of opportunistic fraud?

One avenue that has seen success is education around the fundamental dishonesty of exaggerated claims, which lets consumers know that they may have their entire claim refused if they are found to have exaggerated details. 

Scully explained: ”We flag fundamental dishonesty really early [in the claims process] and explain that if anything is found to be exaggerated then [the claimant] might get nothing and have the claim thrown out.

”That is a good tool to use around the emergence of more exaggeration, particularly for people that aren’t ’real fraudsters’ as it’s probably the first time they’ve done it.”

In this vein, Fraud Charter attendees emphasised the importance of leveraging experienced claims handlers. 

North said: ”Opportunistic fraud can be more difficult to identify or more difficult to find because there’s a thin file when it comes to fraud – they’ve not done it before. 

“It really has to be about file handlers looking at the case and just thinking whether it feels right. It’s about protecting genuine policyholders by not paying [fraudulent] claims.” 

Broader education on insurance fraud is also undoubtedly a powerful tool in the fight against opportunistic fraud, but attendees at the Fraud Charter questioned whether the targeting of that education could be better deployed. 

James Burge, head of counter fraud at Allianz, said the insurer had been using corporate social responsibility days to go into schools and explain about the dangers of fraud to children so that there was a clear understanding of the risks. 

And Ben Fletcher, director of financial crime at LV=, noted that the firm had been exploring engaging with driving instructors to communicate the dangers of claims fraud to young driving students.

As Allen noted, “the earlier we can get these messages rammed home, the better – you need to catch people early”.