New techniques including screening and dedicated teams, are detecting and deterring fraudulent claims. Ray Facer reports
Current ABI estimates suggest that fraud costs the Insurance industry in excess of £2bn, so there are obvious benefits for insurers to apply greater focus to the management of fraud.
Insurance cover has been an easy target for fraudulent activity, with exaggerated losses under house and contents policies frequently being claimed. Detection of fraudulent claims still involves some reliance on the claims handlers `gut-feel' and being quick to recognise the possibility of a customer producing false documentation, particularly where claim forms are provided to the insurer after a repair or replacement had been completed.
The introduction of a new process for the notification of claims by telephone provides the opportunity for us to review fraud detection and prevention techniques.
Fraud comes in many forms but may be summed up under two headings: opportunistic where exaggerated or fictitious claims are made; and premeditated, where staged accidents or multiple identity or cover are arranged.
To improve opportunistic fraud detection, Legal & General introduced new fraud screening techniques based on processes developed for handling lost or stolen travellers cheques.
These screening processes still continue to meet its underlying philosophy, which is to offer an efficient and customer friendly service.
A fraud management programme must be acceptable to customers as well as supporting the brand values of a company, yet be effective to expose or deter fraud.
The screening processes, introduced two years ago, are continually refined to meet this balance plus changing fraud detection requirements as the fraudsters become more sophisticated.
Our experience has shown that genuine claimants have not suffered. In fact most, if not all, customers do not even realise that their claim is screened, because the process is so customer friendly.
We have also found through targeting specific types of claims, detection rates have improved resulting in significant savings in claims costs. Having established our fraud detection processes for opportunistic claims we began to consider how we could refine our processes at policy inception to improve our fraud prevention techniques, and in particular to target premeditated fraud.
We established a dedicated fraud management team providing a continued high focus across the business for the detection of potential fraud or suspicious cases.
Introduction of special fraud management databases ensure data is shared across the company, helping to enhance fraud detection processes and making it easier to share information where necessary with other insurers and the police.
Key to all this activity, which we strongly advocate, is the sharing of data on fraudsters across the insurance industry. We all have a common goal in detecting and reducing fraudulent activity and the sharing of knowledge and best practices can be achieved in a non-competitive way which will help all of us.
Fraud is not a victimless crime as some may think. At the end of the day the honest policyholder will pay. So it is in everyone's interest to tackle fraud head on.
