Michael Faulkner reports on the government's new fraud review and what it will cover

The government's review of fraud will provide the insurance industry with a vital opportunity to bolster its fight against insurance fraudsters.

The review, led by the Treasury, will examine, among other things, the way in which fraud is detected, investigated and prosecuted and the resources that are put into this. These are areas that have come under much criticism from the insurance industry, which argues that insurance fraud is not high enough priority for many police forces.

In announcing the review, attorney general Lord Goldsmith said: "This review aims to establish how we can tackle fraudsters and prosecute them regardless of the scale of fraud involved.

"We must make sure that our laws and procedures are fit for a modern age so that we can tackle sophisticated economic crime vigorously and effectively."

The review cannot have come at a more important time for the insurance industry. The Insurance Fraud Bureau (IFB), an initiative that will use sophisticated data-sharing and analysis techniques to catch fraudsters, is at an embryonic stage.

And while proponents argue that it will be a major leap forward in the industry's fight against organised crime gangs and other insurance fraudsters, its ultimate success will partly depend on whether these gangs can be brought to justice.

ABI head of fraud prevention Chris Hannant says: "Once the IFB is running it will identify potential fraudsters, but what happens next?"

The insurance industry, he says, needs to be able to take action once fraudsters are identified. "Prosecution is key, but there are other ways to disrupt organised crime, such as seizing assets."

And AXA fraud manager Richard Davies, who is one of the industry figures leading the development of the IFB, says: "We are carefully looking at the outcomes from the IFB. We must be able to get a proper response from the police and the justice system."

The insurance industry has for a long time been critical of the lack of resources given to the police to respond to matters of insurance fraud. This not only relates to police forces' lack of enthusiasm for investigating and prosecuting insurance fraudsters, but also to their slowness in providing crime information to insurers and loss adjusters.

In September, for instance, Insurance Times reported that the West Midlands constabulary was failing to meet agreed time limits on the provision of crime reports to insurers, so hampering the industry's efforts to crack down on fraudsters. It admitted taking seven months to provide the reports, when it should have done so in 20 days, owing to "staff limitations".

Hannant says: "A fundamental problem is that fraud does not register on police performance measurements. They get no credit for solving cases."

If the insurance industry is to win its fight against fraud, which is estimated to cost £1bn a year, insurance fraud has to be higher up police force agendas, not only as a way to punish fraudsters and break up crime rings, but also to act as a deterrent to others.

Davies says: "We are starting to get a improved understanding of the risk [of fraud]. We need to be clear about what we want prosecuted."

He is optimistic that insurance fraud will get sufficient priority in the review. He says: "Insurance fraud sits among other fraud types. It is seen as a funding activity and is linked to other types of fraud.

"If it is not seen as a stand-alone activity, it sits up as a priority." IT

The government review of fraud
The review is being led by a Treasury official, based at the FSA. The review team is made up of representatives from various government departments and includes the Serious Fraud Office and the City of London Police.

The team will report to the attorney general and the chief secretary to the Treasury.

An interim report will be produced by January 2006 and a final report by April 2006.

Issues to be addressed include:

  • The scale of fraud in the UK - prevalence and trends, the economic cost of fraud, and the current government response
  • The role government and industry should play in combating fraud
  • The best practice arrangements needed to develop an anti-fraud culture and create strong deterrents
  • The use of fair and effective criminal prosecutions to maintain public confidence in the criminal justice systems
  • Resources allocated to investigating and prosecuting fraud.
  • A fraud case that came to trial

  • The sentences handed down by courts to convicted fraudsters have been criticised for not being severe enough.

    Earlier this year, Bolton Crown Court sentenced five men each to 180-hours community service following their conviction for setting up a personal injury claims scam.

    In the case, four people claimed to have suffered whiplash as a result of a car crash with a bus. The bus driver had reported an accident where the bus, which was empty, collided with a Nissan Micra at 2.15am.

    But investigators, suspicious of the claim, examined the bus's CCTV tape which revealed there had been no crash.

    It emerged in court that bus driver Sajid Iqbal of Bury colluded with the four claimants. Iqbal's friend, Aqeel Javid of Bury, was given £1,800 to organise the scam.

    Judge Timothy Clayson described it as a "carefully planned conspiracy." He handed down 180-hour community service sentences to Iqbal and Javid. The three claimants who appeared in court, Usman Ul Haq, Hassnat Ahmed and Mujtaba Amin, all of Bury, were also given 180-hour community sentences.

    Gareth Ainsworth, director of claims management company Ashley Ainsworth, who was involved in the case said: "Morally, a custodial sentence would have meant they wouldn't be able to do it again."

    An ABI spokesman said: "We always push for the highest sentence, and a custodial sentence is the ultimate deterrent. But ultimately it is for the courts to decide sentences."

    But the public feeling was that if the crime was serious enough to be taken to court, it should be serious enough to be punished.