Dealing with the fraud scum of the universe

Insurance is constantly looking to tackle the poison of fraud and no more so than in the motor market. Horror stories abound about highly organised gangs staging accidents to rip off insurers, but the mission to remove this scum from our streets has been set in motion.

Enter the Insurance Fraud Bureau (IFB). This soon to be launched group is like nothing seen before in the industry. It will use intelligence gathering data from across the industry to identify and hound out gangs who organise staged motor accidents.

Fraud guru John Beadle, who is the IFB operational steering group chairman and Royal & SunAlliance fraud manager, says this will, for the first time, address the issue of fraud across the whole industry with particular focus on motor.

"The experience of insurers in the past is they haven't been very good at looking at the larger, wider picture. They had their heads down working solo on claims handling trying to identify fraudsters.

"But what we needed was market coordination, to identify and prevent the staged accident gangs. That can be done only from above, looking at the whole industry. The IFB is all about coordinated market action to confront the worst aspects of these fraudulent claim gangs."

In its commitment to this, the IFB is backed by 32 insurers with all the big boys on board and backed by significant amounts of lolly from all these insurers, who paid various amounts into the IFB depending on the insurer's market share. The IFB has set itself an ambitious fraud cutting target. It wants to wipe out £50m from the fraud bill in its first calendar year, and has cited a figure in the region of £200m as being what fraud costs motor insurance each year.

Although the ABI says that motor and household fraud totals in excess of £1bn which, it is estimated, pushes up each motorist's policy cover by 5% a year.

But for Allianz Cornhill's claims manager Mihir Pandya, although the IFB is very welcome, there is still much leg work to do to ensure it works.

"I have no doubt that the IFB will work. Failure isn't an option. But for the industry to maximise the benefit, each insurer needs to understand its own specific needs and enter into a dialogue with the IFB."

He adds further: "What is their (insurers) success criteria? How will they maximise their own return on investment? Are they ready to engage with the IFB? Are the right people, processes and support networks in place? Sitting back and waiting for the launch without being adequately prepared might provide a nasty shock once the IFB engages with insurers should internal procedures be wanting."

These are fair questions, but only ones that the IFB can answer in time.

And Rob Smale, Fortis claims director, says the IFB will not erode all fraud activity. "The IFB will prove very effective in fighting fraud.

But I still see gaps in our armoury. Within insurance companies it will still be difficult identifying fraudsters who buy across products. If the fraudster buys from a broker, and then an affinity, and then direct it is difficult to tie them together as a fraud. As an industry we suffer from easy accessibility to our products."

But while the desire exists on behalf of the insurance industry to tackle these fraudsters head on, does the political will exist? There is a big question mark over how the police will react. Police apathy towards insurance fraud has continually prevented fraud culprits from being brought before the law.

And the importance of dealing with staged accidents is not just an insurance issue, as these gangs are also likely not to be involved in just insurance fraudulent activity but other serious criminal activity.

One of the reasons that fraud is not part of the police agenda is that it is not part of the boys in blue's performance indicators set by the Home Office. The ABI, therefore, has been lobbying the government to get the issue of insurance fraud placed up the police and government agendas.

The outcome of this pressure will become clear this summer when the government reports back on the issue.

Performance indicator

On this priority policing dilemma, Beadle answers diplomatically: "We don't blame the police. As fraud has not been put on their performance indicators, they can only work towards what has been set out for them as a priority. So we support the ABI in lobbying the government to put fraud high on the police agenda."

Rob Smale says as an industry the serious fraud cases have not been highlighted enough to put them on the government's radar.

"As an industry we need to be better at marketing the serious aspects of fraud and separate the serious element from the more trivial fraud.

Some people in government see insurance fraud as trivial - such as claiming for a 'non lost' camera. They are unaware of the seriousness and the extent of those who deliberately stage accidents to defraud insurers and the substantial sums involved."

But Scott Clayton, claims and investigations manager at Zurich, says he would like to see the police do more. "As insurers, we would like the police to pursue more cases. But we are aware these are seen as complex. The police are often put off by them being organised rings." Which is worrying though in itself. Does being part of an organised criminal ring put people above the law?

Though Clayton adds that insurers can do more to assist the work of police.

"It is down to us to provide police with tight cases and evidence so they can bring these gangs to justice."

But Nick Starling, director of general insurance of the ABI, says this is a fine line and one that insurers should not stray into.

"We would like fraud to be higher on the police agenda, but recognise that they need more resources to be able to do more to tackle it.

"Our submission to the fraud review argues for more resources to help the police to prevent and detect fraud.

"What we don't want in the cases of fraudulent activity is for insurers to become police by proxy and perform the role of the police."

The whole issue of staged accidents is not new. It was first identified by the ABI back in 1999, bizarrely of all places in Preston. Recently there has been a spate of staged accidents in the M62 corridor between Leeds and Bradford.

But there have been criticisms that insurance companies are to blame for the growing fraud bill. This view says insurers have been complacent about the issue, reluctantly accepting it as part and parcel of the claims process.

"We don't tolerate fraud in any way at all. It is not acceptable and not part of our business," contests Clayton.

But of course the dilemma for any insurer is identifying the fraudsters while keeping the good, honest customers sweet.

Research by Accenture revealed that 8% of insurance customers will consider changing insurers if their claim is not settled within three days, but this increases to 65% if the claim takes more than 15 days.

The IFB is a big step forward in the fight against the professional fraudster.

It will hopefully be able to live up to its billing and analyse new patterns of fraud as well as identifying shortcomings in the fraud process within the industry.

And of course, get those motor fraudster scum.