Norwich Union, Axa and Royal & SunAlliance are poised to join an anti-fraud database that should save them £50m over the next five years. The insurers are set to follow Direct Line in becoming members of the Credit Industry Fraud Avoidance System (CIFAS). Direct writer Churchill will join this week.
Insurance fraud costs the industry £625m a year. The database, formed 12 years ago, lists 150,000 known fraudsters. It can be accessed through licensed credit reference agencies Experian and Equifax, and software house MCL, creator of the Hunter fraud detection system.
Peter Hurst, CIFAS executive director, said: “It is a huge step forward for insurers. They were reluctant to share information for many years, but now that is about to be overcome.”
CIFAS's membership has traditionally been made up of mortgage lenders, loan companies and car finance providers. In 1999, CIFAS users identified 116,000 frauds, thus saving £165m.
CIFAS is to create a new category of membership from September 1, specifically for insurance claims and proposal fraud. Direct Line was the first insurer to join the network last year, and uses CIFAS to screen policy proposal and claims applications for fraud.
Insurers joining the database will be able to share information on fraud with other financial services companies from this date.
Hurst described this as an important development since fraudsters are systematically targeting insurers among banks and finance companies. A typical case is when a vehicle purchased on credit is sold after falsely being reported stolen. Sharing information between insurers and the car loan companies would stop fraudsters from pocketing the proceeds of such sales and of bogus insurance claims.
CIFAS is a highly sophisticated system which can also detect multiple insurance claims if they match with the addresses used by known fraudsters.
Hurst said the database is subject to strict safeguards regarding privacy and cannot be used for cross-selling financial products.
The Data Protection Commission and the Office of Fair Trading have both certified that the database complies with the law. An employer can only search the database for an employee's details with his written permission.
Members of CIFAS are subjected to intensive checks by independent auditors to ensure they are using its data correctly.
“It can take up to a year for new members to be accepted, because once a person is on our database it can affect them for life,” said Hurst.