Comment: Tackling fraudulent claims

Ever since the late 1980s and early 1990s, fraudulent claims arising from road accidents have been on the increase. Occurrences reached a peak in the mid 90s due mainly to a lack of awareness from not only the public, but also more crucially the insurance industry itself.

Since then, I am pleased to say there has been a definite shift in attitude on the part of most insurers. They have taken the fight to the lawyers who represent the `innocent' parties.

The people involved are not just individuals pursuing exaggerated claims, but are criminals out to deceive the insurance industry. In most cases, they are players in a larger scam run by so-called reputable accident management businesses whose sole purpose is to defraud insurers.

They usually involve local people who they can trust and in some cases claims are brought without the knowledge of the claimants. Luckily, insurers are now alive to these schemes and are uncovering the people behind them.

It is therefore becoming important that certain steps are taken to ensure these schemes are defeated in their infancy.

Exploring the damage to vehicles and comparing it with the accident circumstances represents the initial stage of many enquiries. Also proving successful is the use of specialist investigators as well as conducting routine checks through, for example, the Motor Industry Anti-Fraud and Theft Register (MIAFTR) database to establish background history.

Often though, these methods were overlooked. Consequently, claims for straightforward whiplash injuries were paid as they appeared genuine.

Having a detailed insight into the Asian communities from which a vast majority of claims arise, has proved useful in the battle against insurance fraud. In the preliminary stages, I found that insurers struggled to interpret Asian names. For example, it was difficult for them to identify whether particular names were male or female or whether they belonged to people from Muslim backgrounds or other religions.

Such factors have adversely affected claims. The perpetrators have exploited this to their advantage, particularly when being interviewed by investigators. Instructing organisations that have Asian language speaking staff have helped insurers tackle these problems.

Unfortunately, some insurers are not willing to do this, which results in many cases slipping through the net. This apathy is what the perpetrators thrive upon.

The average case involves two or three whiplash claims. With solicitors costs the reserve could easily reach £8000. If preventative tactics are astutely deployed then substantial savings can be made.

Is it not worth spending £1000 on investigation costs, particularly if the claims are brought through recognised suspicious sources?

A sensible and commercially prudent approach could be to investigate claims up to a certain point and then review the evidence. This way the insurer can monitor how much is being spent rather than having to provide investigators and panel solicitors with blank cheques.

To illustrate this I refer to a case involving one of our insurance clients. This insurer has maintained a tough stance against suspicious claims. By adopting a similar approach to the one outlined above all the claims were discontinued - the ultimate reward.

The case revolved around a three-car shunt in Luton. The policyholder was the driver of the last vehicle. The passengers in the policyholder's vehicle, the driver and passengers of the two vehicles in front brought claims against MMA Insurance group.

The first stage of the investigation was to obtain engineering evidence. This confirmed the damage was not consistent with alleged accident circumstances.

We then instructed investigators to pursue suspicions of fraud. No firm connections were established between the parties, but the lead vehicle's insurers had not paid him for the pre-accident value of his vehicle. This in itself arose suspicions of a fraudulent claim.

The insurers decided to take the investigation one step further. They carried out MIAFTR checks, which revealed that their policyholder had brought claims against other insurers arising from accidents two months before and two months after the accident in question. The insurers dealing with those claims had instructed their own solicitors.

Initially, there was a reluctance on the part of the two other firms to take these cases further. Our clients instructed us to liaise with the other solicitors and exchange information, with the parties agreeing to use the same barrister.

Due to MMA's perseverance, the other insurers were persuaded to defend these cases in full as all three cases contained suspicious elements. All three proceeded at the same time in court to obtain a flavour of the kind of characters involved.

Eventually, all the cases were transferred to Luton following the filing of detailed defences pleading fraud.

By now, the costs of the investigation were rising but likewise so was the evidence against the claimants. Our insurance clients placed a reserve of around £80,000 on their file.

Prior to trial all the claimants decided to discontinue and accepted an order for costs against them.

Coming off the back of such successes has been increased numbers of specialist in-house units in insurance companies to deal with potentially fraudulent claims. Unit members become familiar with necessary procedures and acquainted with the `usual suspects' enabling them to be dealt with accordingly.

Training of staff is another key area. People not identifying potential frauds at an early stage prejudice the investigations of some claims. This hands an advantage to the opposing lawyers, as they will then prey on any delay from the insurer to justify running up a large bill before any form of investigation is undertaken.

The Association of British Insurers (ABI) also plays a crucial role in encouraging insurers to combat fraud. Too often, however, exchanging information between solicitors and insurers becomes difficult unless it is ratified by an ABI initiative. This non-cooperation results in many claims being paid without sufficient investigation.

Over the years the judiciary has gradually accepted that fraudulent activity exists. Previously, district judges chastised us for suggesting that `normal' people would get involved in insurance scams. Nowadays whilst there is still some reluctance, generally, judges are prepared to digest evidence relating to fraudulent claims.

If the judiciary is moving in the right direction, then on the whole, the same can't be said for the police. Too frequently, the police are not prepared to investigate individual cases due to lack of resources. They look for the larger conspiracies and even then the evidence has to be handed to them on a plate before they would touch it.

Imagine the deterrent if every successfully defended case results in a prosecution by the police as well as the ensuing media coverage. Furthermore, a prison sentence would make you think twice about plotting your next fraudulent claim.

Finally, in the event of cases being successfully defended, insurers are now becoming more aware to the possibility of asking for costs against accident management companies. In several cases, they represent the driving force behind the claim. If more insurers applied for such costs orders, this could hit the real criminals in the pocket.

I would urge other insurers to continue the significant strides that others have been taken over the years. Their desire to spend money on investigation; their continued support for their team of experts and their general perseverance will reap rewards in the end - not to mention the sizeable reserve releases!