According to Richard Davies of the IFB, collaboration within the industry, as well as with the police, is the most effective way of combating opportunistic fraud
Richard Davies, deputy chairman of the Insurance Fraud Bureau (IFB), recently looked at the issue of fraud management, concentrating in particular on how the industry collaborates to manage contrived accidents across the market.
“There has been significant development in this area over the last 18 months or so and I think that there will be more development as we move into next year,” he said.
When asked about developments within fraud, he said: “Typically we break down the conversation into two simple dividers, one being management of opportunistic fraud, which, for me, is a competitive issue. It is something that insurers can gain an advantage on. They understand what opportunistic fraud is all about and they understand what the motivators are. Principally, it is about protecting personal position.”
As a market, the industry has increased the value of fraud controls quite dramatically over the last three years, noted Davies. “We started in 2004, measuring the value of fraud protection at around £200m. That increased dramatically last year, to over £400m, and I have no doubt that the current benchmarking exercise, the results of which will be published by the ABI in a matter of weeks, will again show a very big jump in those detection figures. The market should be happy that it is moving forwards quite rapidly in managing opportunistic fraud.”
He noted, however, that organised crime is something entirely different. “It is, without a doubt, the minority of the risk that we manage currently. Its motivation is criminal, its management is informal, and it is ad hoc. It is difficult to nail to the wall – it is soggy jelly – which is why a different approach is needed.”
In total, the ABI estimates that the industry currently loses about £1.6bn a year to fraud. “That is a figure that is in line with the estimate that has been across the market for some three years now. I am not too concerned as to whether or not that figure is 100% accurate, or 80% accurate, or 60% accurate. It is big, and that’s all that really matters in terms of the fraud management debate. Fraud needs some focus.”
Davies said a great deal of thought had gone into the work of the IFB and what it should achieve. “I believe that expectation setting is absolutely crucial as far as this concept is concerned. We are here to optimise the disruption of organised and cross-industry fraud. We are not here to deal with opportunistic fraud.”
There is a great degree of developing intelligence. This comes from data that is actionable – information that the IFB can do something with. “We use an exceedingly powerful and sophisticated software, provided by our technology department. That software develops a number of outputs on which we can work with the industry to assess, plan, and agree outcomes in terms of coordinating, managing or leading individual investigations,” said Davies.
“The key is the agreeing of outcomes, which really does help to decide where you want to end up
Richard Davies, IFB
“The key is the agreeing of outcomes, because those outcomes can vary, and it really does help to decide where you want to end up, because that affects the way in which we collect and assess revenues.”
Davies cited the fraud hotline number, which has resulted in recoveries in excess of £5m purely from public tip-offs, as an important development. The IFB is also managing the supply chain so that it can bring together all the elements it has in the supply market that are working on the same issue. And most importantly for Davies is the managing of the police interface.
“They have asked us not to come to them as individual insurers and lawyers, but to come to them as an industry. If we can demonstrate that we are managing the problem, and have come together to deal with serious issues, we will be supported in everything we want to do,” said Davies.
“To date, the police have been superb. We are generating actions and generating results because we are going to them with serious issues.”
What has the IFB achieved? While the IFB only went live on 26 July 2006 – it is not yet a year old – it has delivered on time and on budget, said Davies.
“How many industry initiatives have done that in the last 10 years? This year we have delivered some fairly significant steps forward. We are delivering in terms of prosecution, recovery and disruption, and in particular we have built police confidence in the IFB brand.
“We have developed fantastic relationships with the City of London police, and also the Hertfordshire and Bedfordshire police, and this is opening doors elsewhere. So I can now talk to chief police officers with credibility behind me. That credibility is key for the industry.”