Nathan Skinner says there is still much to do to convince the public of the seriousness of insurance fraud
Worryingly for insurers, many people seem to think that exaggerating an insurance claim is fair game. But it's no secret that these fraudulent claims cost insurers millions each year. In turn, the insurers tend to pass these costs onto their customers in the form of an average 5% increase in premiums.
Opportunistic fraud, which accounts for some £8m of the total £1.6bn annual cost of insurance fraud, is indicative of the public's view of fraud as a victimless crime. One in ten adults admits to having made a fraudulent insurance claim on a general insurance policy.
Common types of opportunistic fraud include claims for a new carpet or three piece suite resulting from deliberate spills or cigarette burns. The ABI has said that it is incumbent on insurers themselves to have controls in place to tackle this type of fraud.
Organised fraud, accounting for the lion's share of annual insurance industry losses, includes "crash for cash" scams where criminal gangs stage motor accidents in order to claim from the innocent motorist's insurer.
Set up in June 2006, the Insurance Fraud Bureau (IFB) is charged with tackling organised fraud. The Cheatline initiative, designed to provide a channel for people to report fraud, forms a core element of the bureau's anti-fraud strategy. "The IFB is already having a significant impact on tackling organised insurance fraud," said Nick Starling the ABI's director of general general insurance.
“The IFB is already having a significant impact on tackling organised insurance fraud.
Nick Starling the ABI's director of general general insurance.
So far, though, success in the public's eyes appears to be muted. In a survey, commissioned by Experian, only a small proportion of the population (15%) felt that efforts by the insurance industry to combat fraud were sufficient, while over half the population (51%) stated that they did not know whether the industry was doing anything or not.
The key challenge for the industry appears to be how to address people's attitudes to insurance fraud. David Murphy, managing director of Experian, commented: "People see insurance fraud as a crime against an organisation rather than an individual and, as a result, appear less likely to report it."
Strange then that the ABI shelved its anti-fraud advertising campaign this year, particularly when a similar strategy met with some apparent success in Ireland.
The Irish anti-fraud campaign included print and broadcast media advertising as well as a dedicated hotline. Michael Kemp, chief executive of the Irish Insurance Federation, said: "We are encouraged by the ongoing response to this campaign. There is now greater awareness that false or exaggerated claims directly impact on the cost of insurance."
So how should the insurance industry respond? A spokesman for the ABI said: "We do need to address the public's attitudes, we must address what is putting people off committing fraud – that is the increased likelihood that they'll get caught."
“People see insurance fraud as a crime against an organisation rather than an individual and, as a result, appear less likely to report it
David Murphy, managing director of Experian
The ABI, now working alongside the FSA, believes joint operations are the answer.
"These figures highlight that greater deterrents, such as criminal prosecutions, are needed to discourage fraud.
"This is why we are calling for police forces to be given more resources so that fraud can be treated with the seriousness it deserves."
As it stands, the one police force in the country that has a dedicated fraud team has 150 detectives investigating an average of 350 cases at any one time. It remains to be seen if it was a good idea for the ABI to ditch its anti-fraud advertising campaign.
Judging from the most recent figures it seems there's still a long way to go. IT