Policing cars

The Motor Insurance Database (MID) was established to stamp out uninsured driving in the UK, a problem that costs the insurance industry an estimated £400m per year. One year on, the question that every insurer, broker and motor policyholder wants answered is: "Is the database working?"

At this stage, there are few statistics on how many uninsured drivers have been caught and prosecuted, or on whether the MID has actually slowed the rate of increase of motor insurance premiums.

But there is unanimous approval of the database from the insurance industry and initial reports suggest that it is having an impact on the problem.

Cunningham Lindsey head of motor investigations Peter Taylor, a former police officer and an insurance investigator of 15 years, says he is confident that the MID will be worthwhile.

"I've seen it having practical successes in day-to-day investigations... you do tend to find that if a project isn't successful, it is dropped fairly quickly because people see that there isn't a benefit from it."

The Motor Insurers' Information Centre (MIIC), which was established by the insurance industry to develop and manage the MID, says that on average, the police access it more than 20,000 times a day.

The centre also estimates that because the database will reduce uninsured driving by forcing people to start insuring their vehicles legitimately, the motor insurers will increase their annual premium income by between £25m and £50m. This dwarfs the database's £2m set-up costs and its £1m annual running costs.

Further savings are expected to come from a drop in the levy that each insurer pays to the central Guarantee Fund, which is used to pay claims caused by uninsured drivers.

And because the MID provides quick and accurate vehicle insurance information, the cost and time involved in claims handling are cut.

The MID is considered to be a great step forward for co-operation within the insurance industry. Not only have all the motor insurers contributed to the costs of developing the database, they are also all continuously playing their part in sharing information to reduce costs, cut fraud and pull motor premiums down.

Royal & SunAlliance (R&SA) regional fraud manager Karen Berrington says that any data sharing is an effective and useful tool to combat fraud because it protects honest customers.

"We are working very closely with other companies, and the Association of British Insurers (ABI), to combat fraud, and the use of a number of different databases helps us do that."

Apart from the MID, other databases that many insurers subscribe to include the Claims and Underwriting Exchange (Cue), the Motor Insurers' Anti-Fraud and Theft Register (MIAFTR), Hunter and the Credit Industry Fraud Avoidance System (CIFAS).

Berrington explains that all the databases exchange information to check and compare data to identify anomalies.

This means the insurers can begin to get a clearer picture of who is defrauding them and how often it is happening. It also allows them to build a better case against fraudster - the type of case that could lead to a prosecution.

Allianz Cornhill claims fraud controller Mihir Pandya says that, in the past, insurance companies saw the non-payment of a fraudulent claim as a victory, but they should have been pursuing the fraudster to prevent him from trying the same trick again.

"Being satisfied by not paying sends the wrong message to the fraudster," he says.

"One problem is that people don't perceive insurance fraud as a serious crime.

"People say the punishments aren't stiff enough but I think the judiciary looks at us and says: `Sort yourselves out first and then we can look at it.'"

He adds: "We need to show the courts that, as an industry, we can attack fraud in a way that's cohesive and focused. It's a two-way process."

Cunningham Lindsey's Peter Taylor agrees: "It's a constant process of trying to make the courts aware of the seriousness of fraud."

However, he says that since the industry has started to work with the police through initiatives like the MID, he has noticed sentences becoming harsher and more common.

"So it is toughening up," he says. "I am seeing the net closing on fraud."

Fighting fraud - other tactics
Uninsured driving is just one of several types of fraud. The insurance industry has to watch out for chancers when claims are made and when they are issuing an insurance policy.

Allianz Cornhill claims fraud controller Mihir Pandya says it is important for every insurer to dedicate specific resources to the fight.

"Cornhill is starting to put a fraud specialist in each branch now... you need to have individuals with very specific expertise," he says.

"That is purely because of the emergence of frauds such as `staged accident fraud' [accidents arranged between willing parties]."

He adds that fraud awareness needs to be spread across an organisation, from the chief executive, who coordinates an anti-fraud strategy, to the mail handlers in post room. "We're even publishing [our successes in] fraud newsletters."

Apart from databases and company-wide awareness, insurers are starting to use more sophisticated fraud identification techniques in their processes. One company that supplies the latest antifraud technology is Cambridge-based Ncorp. Its technology identifies patterns within information that distinguish honest customers from fraudulent ones.

For example, telephone operators use it to assess responses from claimants. The technology can pick up pieces of data that could indicate a fraudulent claim. This spurs extra claim investigation.

Ncorp chief executive officer Nick Bidmead says: "Our technology was originally developed at Cambridge University. It's a very powerful mathematical engine for detecting patterns of behaviour."