Accountants and consultants Moore Stephens have warned companies engaged in the insurance industry that they must put in place formal, anti-fraud structures, or risk being targeted both externally and internally.
Writing in the firm's Insured Interest newsletter, Moore Stephens' Alan Tidy said: “There is evidence to suggest that there are potential gaps in the systems that the insurance industry has put in place to detect and eliminate fraud.
“Historically, exposure to fraud in the insurance industry has been regarded as a comparatively low-level risk, and one most closely associated with claims. But today, with the massive growth in internet business, the risk can no longer be considered peripheral.
“Exposure to the risk of fraud should form part of the overall operational risk management strategy which insurance companies and intermediaries need to have in place to operate efficiently and profitably. There are some fundamental rules to follow:
Tidy concluded: “Insurance cannot afford to consider itself a safe industry in terms of its exposure to the risk of fraud. Its senior managers can no longer afford to argue that any investment in fraud protection and prevention must be justified in terms of the savings achieved. A longer-term view is needed, one that will see effective procedures put in place early in the life of new products, systems and services, particularly those which are IT-based.
“Firms must have a formal anti-fraud structure, irrespective of size or business model. Without it, they are prone to be targeted either externally or internally, or both.”
