Michael Faulkner examines the final report of the government's fraud review

Last week the final report of the government's wide-ranging fraud review into how to reduce fraud was published. The report, which made 62 recommendations on issues such as police resources and penalties for fraudsters, has received a cautious welcome from the insurance industry.

"The lobbying starts here," a spokesman for Norwich Union (NU) said.

Although the review looked at ways to tackle the estimated annual £16bn-worth

of fraud across the economy - from benefit fraud to credit-card scams - insurers and the ABI agree that the recommendations have the potential to assist the insurance industry's own battle with fraudsters.

The report recommended the development of a national fraud strategy and called on the Home Secretary to make investigating fraud a police priority. It also called on fraud squad resources to be ring-fenced to prevent them being diverted to other investigations and greater collaboration between the public and private sectors.

These are areas that the insurance industry has been lobbying the government to address.

Last year, NU published a comprehensive report on the impact of insurance fraud on policyholders and the economy. It outlined three key factors that, it argued, were fuelling the problem. These were: a failure to fully measure the amount of fraud taking place, an inconsistent approach to prosecuting and sentencing fraudsters, and the absence of a cohesive national fraud strategy.

At the time, NU head of fraud Chris Hill said: "The proceeds of fraud are directly funding crime on the streets but there is an absence of a cohesive national fraud strategy to tackle this. To turn this around, the public and private sectors need to actively collaborate together with government and law enforcement bodies."

The final report does address these issues, but NU's concerns lie with the detail.

The insurer wants to see an insurance industry representative on the National Fraud Strategic Authority (NFSA), the body that would oversee the national fraud strategy.

NU also wants clarification around what the report proposes with regard to police resources, targets and private sector involvement in fraud investigation. An NU spokesman asks: "How will fraud targets be set? Will it apply to fraud per se, or will there be a set target for insurance fraud? How will the ring-fencing be managed? Will the resources be allocated to different types of fraud or all fraud? We need to ensure a structure to it."

The ABI is also looking for clarification of some of the proposals, although it is generally supportive of the report, which it says has addressed its main areas of concern.

"We are pretty happy with it. It is amazingly detailed and clearly going in the right direction. The language is right - although it is hesitant in some places," says Chris Hannant, head of fraud at the ABI.

One issue of concern for the ABI is the question of private sector involvement in investigations. Hannant says: "At one point the report says it is plausible for £5m to come from the private sector, without explaining where that would come from.

"We will be talking to the government about this. Insurers pay a lot of money in taxes and put a lot more into investigating fraud, so there are question marks over this point."

John Beadle, Royal & SunAlliance counter-fraud manager is positive about the recommendations. He says the creation of regionalised fraud investigation support structures for the police and the creation of a national lead force, based on the City of London police fraud squad, are "excellent" suggestions. "They would be a real step forward."

Beadle also argues that the use of asset confiscation laws could help provide additional resources to encourage police to investigate insurance fraudsters. The laws allow the police to keep a proportion of assets recovered from criminals. "If insurers can show the police that fraudsters have assets, then the police can put some of these assets towards their budgets."

But he warned care must be taken to ensure a "balanced" approach to policing. IT

Main recommendations

  • A National Fraud Strategic Authority to develop an umbrella strategy for tackling fraud in the UK, including anti-fraud campaigns

  • The creation of a national fraud reporting centre to analyse fraud data and provide reports to the police

  • The government should develop guidance on the sharing of fraud-related data between organisations

  • Fraud should be made a policing priority

  • A greater range of non-custodial sentences for convicted fraudsters

  • A national lead police for fraud should be created, to manage the reporting centre and act as a centre of excellence for fraud investigations

  • Increased cooperation and collaboration between police and private sector bodies over investigations

  • Consideration be given to increasing the maximum sentence for serious fraud offences to 14 years

    • The government is currently consulting on the review's recommendations, with the consultation period ending on 27 October 2006.

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