Industry’s top concerns revealed

Ghost broking, the effect of organised fraud rings and the review of the sentencing guidelines were all on the agenda at the final Fraud Charter meeting for 2013 at the Royal Exchange in London.

The inaugural Insurance Times Fraud Report was hot off the press and the discussion centred on the fraud survey results published in the report.

More than 230 insurance professionals took part in the survey.

The survey revealed that 54% of respondents believed organised fraud rings are the biggest threat to the insurance industry, while 34% believe it is exaggerated claims and 12% naming opportunistic fraudsters as the biggest menace.

The members were keen to stress that organised fraud rings are not the only problem; but the substantial economic effect of these crimes would inevitably draw the most interest and the most investment.

FICO client services partner Richard Hill said: “Rightly or wrongly, the financial impact of organised crime is more significant so it is where the focus goes because that is where you’ll get the best result. That’s the one that gets the attention.”

Keoghs partner and director of counter-fraud strategy James Heath said: “The IFB [Insurance Fraud Bureau] is looking at 7% of industry risk, but there is a big part of the iceberg that’s under the surface that we haven’t got the capacity to look at.”

Drawing a clear definition between opportunistic fraudsters and exaggerated claims can prove a difficult task, the members said.

Arguably the opportunistic fraudsters of today are the organised criminals of tomorrow, and exaggerated claims can also be viewed as opportunistic.
The discussion highlighted the dangers of looking at these categories in isolation.

The intention of the claimant must be taken into account, but the economic viability of the investigation will always be a consideration; as Ford said: “Exaggerating a claim is fraud. No matter whether it is £2 or £2m … however, there is an economic reality about fighting and investigating fraud as businesses we all have to take in to account … For me it comes back to the intention of the claimant: Is there an intention to exaggerate a claim for financial gain? If the answer is yes and it is economically viable to investigate it, then we should investigate it.”

The survey also revealed that 64% of respondents believed the industry is improving its responses to fraud, with only 7% judging it to be falling further behind.

Members discussed the need to benchmark success, agreeing that appropriate measures must be put in place to ensure success can be measured and
to secure investment for anti-fraud activities.

Information sharing was also hotly debated. DAC Beachcroft partner Antonia Ford said the industry had made “significant improvements”, but there was still a long way to go.

Prevention, punishment
The members agreed that fraud prevention is key, and raising public perception and understanding of the fraudulent nature of exaggerated claims will see attitudes start to change.

The survey also revealed that 87% of respondents felt punishments for fraudsters were not strict enough.

The Fraud Charter members expressed some concern about the review of the sentencing guidelines, which could see sentences for fraudsters increase.
The group was asked if it felt the review of the guidelines would cause a sea change in the fight against fraud.

GAB Robins head of counter fraud and investigations service Neil Daniel said: “My answer would be no. Critically, the bigger impact will be if we get better at catching people, otherwise the sentences make no difference. There is a lot more that we can do in the industry, like using a whole raft of other legislation such as confiscation orders.”

IFED contribution
The survey also revealed that 23% of respondents believed that the Insurance Fraud Enforcement Department (IFED), the specialist police unit dedicated to combating insurance fraud, is having no impact.

Despite IFED’s successes, including making 27 arrests connected to a suspected ghost broking ring last month, Fraud Charter members expressed concern about its capacity to take on more referrals due to workload.

AXA UK head of fraud and IFED board member Richard Davies said: “To help the industry IFED is now guiding us to make best use of our resources by letting us know how close it is to capacity.”

IFB director Ben Fletcher said IFED had “increased capacity to take enforcement action, raised standards within the industry and increased media profile”.
Responding to the survey results, IFED said that its successes were recognised by the 77% of respondents who believed that IFED is having an impact in the fight against fraud. “The challenge for the unit now is to retain the confidence of those who are already aware of its work and to further reach out to those who are not.”

The results of the Insurance Times fraud survey gave the Fraud Charter members plenty of food for thought and shed new light on some of the industry’s most challenging issues.