John Gelmini says the industry 'must do better' in the fight against claims fraud.
Despite the rose-tinted optimism of the ABI director general, the insurance industry is under pressure. The FSA is even monitoring the solvency ratios of a number of selected insurers on a daily basis.
Insurance analyst Nick Cazalet reported in the Times that; "the plain fact is that with profit companies alone have seen their above-the-line solvency blown away."
The City and major institutional shareholders are showing no signs of being `understanding'. The fate of the Chief Executive of Royal Sun Alliance is just one recent example of the City's new willingness to hold individuals to account.
In this pressurised environment insurers need to examine their costs, processes and working practices. One of the largest of these costs a rise from claims - an increasing number of which are fraudulent. ABI figures suggest that fraudulent claims submitted to general insurers amount to over £1 billion a year.
There is therefore a need for a concerted effort to cut fraud out of back office, and claims processes.
Responses to fraud have until now been half-hearted and ineffective. It was possible in easier times to simply charge higher premiums and thus ignore the problem.
Nowadays a more aggressive management culture sees more and more processing work hived off to `near-shore' locations. Claims processing work that is undertaken in this country is often undertaken with barely 30 seconds spent on each claim.
This lack of scrutiny in a fast paced environment creates opportunities for fraudsters to inflate claims, submit bogus documentation and create claims for losses which never took place.
Hoping that the problem will go away is no longer a viable option.
Developing a fraud free world is a non-starter but minimising its incidence is minimised is an objective that directors should pursue. Only highly trained staff equipped with the latest investigative tools can hope to catch today's increasingly sophisticated and cunning insurance fraudsters.
Even then failure to collect the evidence properly will result in cases being thrown out of court, (assuming they get there in the first place). Furthermore in today's increasingly litigious environment there is even a risk of the accused insurance fraudster being able to sue on all manner of grounds.
There are those insurers who undertake in-house training and fraud and risk minimisation and use neural technology to stop fraudulent claims. The effectiveness created by these measures is all too evident in the figures which the insurers have to submit to the DTI every year.
Equally, over zealous marketing in insurance telephone call centres can lead to potential policyholders being `prompted' to give selective answers to questions which in turn can create an environment where questionable business quietly slips into the books.
Expert assistance is an absolute in terms of creating business models which root out insurance fraud. Beyond that there needs to be an element of deterrence whereby the fraudster is actually brought to book as an example to others.
Insurance claims departments who cannot get the police to act on this are failing in their duty to protect the interests of honest policyholders.
Focus Training, established by two former West Midlands detectives, has trained investigators searching for missing Nazi Gold, forensic accountants and insurance claims.
They all need to be learnt from experts in the field who understand the critical need to balance effectiveness against fraud with the risks of breaching Human Rights, PACE, RIPA and the growing body of legislation already in existence.
John A Gelmini can be reached at Focus Training on john@focustraining.co.uk
