A new Act aimed at catching benefit cheats could mean real progress in the way that insurers and government agencies pool their data to battle fraudsters
There has been much debate over the past 12 months regarding the importance of insurers putting their commercial sensitivities to one side and sharing data to collectively fight insurance fraud.
Databases are becoming more commonplace, with some of the industry's largest insurers already joining forces. Direct Line and Churchill, for example, already share data: both use the Hunter system, which is now also used by Royal & SunAlliance.
The Social Security Fraud Act 2001(SSFA) is an unlikely source for what may be the start of a new data-sharing age. At first glance, the Act is of no concern to the industry and appears to affect only the DSS and benefit cheats.
But a closer look reveals opportunities for insurers, government agencies and local authorities to form closer working relationships than ever before in the fight against fraud.
Some of the Act's powers are already in place and its main parts come into force later this year. It provides government agencies such as the DSS with the power to demand access to information which will assist them in detecting and combating benefit fraud from insurers, banks, credit agencies and other bodies who store data on suspected fraudsters.
This power is also extended to local authorities, who themselves directly provide various benefits such as housing benefit, making them targets for fraudsters.
The Act is not the only new development in the fraud arena for 2002. In a Court of Appeal ruling the mere fact of fraud is enough to amount to repudiation or to breach of continuing duty. The court held that a fraud is not a material fact in its own right, but rather it must relate to a material fact. This case (K/S Merc-Skandia XXXXII v Certain Lloyd's Underwriters) concerned the continuing duty of utmost good faith. Although the insured had acted dishonestly, the court held that it was immaterial to the policy condition, which was concerned with the impact on the insurers rather than the conduct of the insured.This is a blow to insurers and the decision has implications far beyond the particular circumstances of that case.
In another case a man claimed on a life insurance policy for a permanent disablement benefit of £50,000 after an accident at work which broke his wrist.
The insurers obtained covert video evidence of the claimant which the court accepted and showed that the claimant had "at least" grossly exaggerated his injuries. However, the only medical evidence before the court was the claimant's own medical evidence, which supported his case.
The court was not prepared to substitute its own inexpert conclusions based on the video evidence for the only expert evidence before it. It therefore awarded the claimant £50,000.
For these types of case medical evidence should always be obtained to support and comment upon video evidence.
Jamie Taylor is the head of insurance fraud at DLA.
