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									                                                                                             August/September 2009
                                                                                                          Hot topic


                   Welcome to the
                   Journal’s first
                   interactive Hot Topic
                   feature, where each
                   issue we will kick-off a
                   debate on an important
                   industry issue and
                   invite you to join in
online – the focus this time is fraud.
On page 21 you’ll see contributions
from our panel of experts, who are
lined up and ready to respond to any
comments or queries you might have.
When you’ve read this article, log-on to
www.cii.co.uk/journalhottopics,
where you’ll find instructions on how
to participate. I hope you find this Hot
Topic debate enjoyable and informative.
Kevin Pratt, editor, The Journal                                                                                                           19




Focus on
                                              few issues unite the country like             are seen as fair game. According to the
                                              ripping off insurers. Politics, religion,     Association of British Insurers, the cost of
                                              race, sport… start a debate on such a         insurance fraud is estimated to be £5.2



fraud
                                              topic in any pub in the land and you’ll get   million every day. At £1.9 billion a year,
                                              a wide range of passionately-held views.      the cost of undetected fraudulent general
                                              But mention making an insurance claim         insurance claims is up 24% from £1.6
                                              and almost everyone will be of the same       billion two years ago.
                                              voice: insurers always try to wriggle out        The economic downturn is doubtless
                                              of claims, and they always drag their feet    exacerbating the problem, with insurers
                                              over making a payment.                        detecting more the fraud as people find
                                                 If you then hint that you might try        money increasingly tight. Last year, says
                                              to claim more than is your actual due,        the ABI, frauds worth £730 million were
                                              you’re likely to be congratulated and         detected and prevented – a 30% increase
                                              wished the best of luck on the grounds        on 2007. And it is not just at the claims
                                              that this is only what your no-doubt          stage that the fraud problem rears its
                                              grasping insurance company deserves.          head: more people are being caught lying
                                              And you’d be just as likely to get the        or withholding relevant information in
                                              same support in a quiet country pub           attempts to get cheaper insurance.
                                              where everyone has their own pewter              In all, fraud is thought to add £44
                                              tankard as you would in a sink estate         to the cost of every general insurance
                                              boozer where they serve drinks in plastic     policy.
                                              glasses.                                         To try to get to the root of the problem,
                                                 Insurers, for reasons only an expert on    the ABI commissioned research into
                                              the UK’s national psyche could divine,        public attitudes towards insurance fraud. >
     The Journal
     Hot topic



     Individual insurers are                                            > The survey of over 3,000 adults revealed
                                                                          that 16% would not rule out making
                                                                                                                              has been used to identify criminal
                                                                                                                              networks putting innocent motorists’
     incorporating various                                                an exaggerated insurance claim, while
                                                                          44% thought it acceptable or borderline
                                                                                                                              lives at risk with “crash for cash”
                                                                                                                              scams. The Insurance Fraud Bureau has
     techniques into the claims                                           behaviour to increase the value of an               worked closely with the police in joint

     process to detect fraud                                              item when claiming. Three in 10 felt the
                                                                          same way about overstating the extent of
                                                                                                                              investigations, successfully disrupting
                                                                                                                              the actions of criminal gangs, stemming
                                                                          any damage so as to boost the value of              and reducing the growth of the problem
                                                                          the claim.                                          on the UK’s roads.
                                                                             Those figures are depressing enough,                 According to the IFB, organised crash
                                                                          but you don’t have to be of overly                  for cash networks have reduced by 11%
                                                                          cynical bent to feel that the respondents           over the past two years, at a time when
                                                                          might have been somewhat less than                  crime is reportedly on the increase due to
                                                                          honest when providing the answers.                  the recession.
                                                                          Only 16% would not rule out making                     Drawing on two years of insurance
                                                                          an exaggerated insurance claim, would               claims and policy data, the IFB can
                                                                          they? Hmmm – that £1.9 billion fraud bill           demonstrate that hotspots where there
                                                                          has to come from somewhere…                         has been joint police and IFB activity are
                                                                             Individual insurers are incorporating            experiencing fewer claims. Particular
                                                                          various techniques into the claims                  areas where this is the case include
                                                                          process to detect fraud, with                       Luton, East London, Harrow and Walsall.
                                                                          psychological profiling and cognitive               Other areas where the problem has
                                                                          interviewing being successfully                     stabilised include Birmingham, Uxbridge
                                                                          employed to defeat fraudsters. Firms                and London North-West.
20                                                                        are also pooling information to root out               Conversely, where the police have yet
                                                                          fraudsters, with home insurers enjoying             to engage with the IFB, crash for cash
                                                                          good detection results using databases              activity is increasing, most notably in
                                                                          such as CUE (the Claims & Underwriting              Liverpool, Halifax and Ilford & Barking.
                                                                          Exchange), the Electoral Roll and the               The IFB currently has 25 active joint
                                                                          Land Registry. Work is also underway                police operations spread across 13 police
                                                                          to build a market database of known                 forces. Three concluded joint operations
                                                                          fraudulent claims and claimants.                    have generated 29 convictions and
                                                                             State-of-the-art technology and                  combined custodial sentences of over
                                                                          data pooled from across the industry                20 years.



      IFB – a crash course
      in tackling crime
      The Insurance Fraud Bureau,             forced to crash into the back of        Contents cover                               undertaken by both the IFB and
      to which 96% of personal lines          the fraudster’s vehicle. Claims are     A call to the Cheatline alleged              the insurance company concerned;
      insurers belong, was launched           then made against the innocent          that an individual had registered            the location of the vehicle was
      in July 2006 to clamp down on           motorist, and these often including     a dishonest claim for the loss               identified, the vehicle was recovered
      organised insurance fraud. It says      accounts of fictitious injuries from    of an engagement ring when,                  and a salvage value of just under
      criminal gangs organising complex       gang members, some of whom may          in fact, it was not lost at all. The         £16,000 achieved.
      scams are earning up to £4 million      not even have been involved in the      IFB interviewed the subject had
      a week from organised insurance         accident.                               admitted that the claim was                  Life
      fraud, often using the proceeds to         Other examples of organised          invented. A saving of £2,200 was             Information was provided via the
      fund other forms of criminality.        insurance crime include fraudulent      recorded and the policy was voided           Cheatline alleging that a family had
           The Bureau analyses the details    arson or disability claims and          to the date of claim.                        registered a life assurance claim
      of insurance policies and claims        supplier fraud, where insurers                                                       for an individual who was still alive
      records of all insurer members to       receive bills for work that has not     Motor                                        and well. Following investigations a
      identify suspicious activity. It then   been done.                              The IFB received information that            repudiation letter was issued stating
      leads or coordinates investigations                                             an individual had registered a               that the insurers were not satisfied
      with the insurers and police to         Beat the cheat                          fraudulent motor insurance claim             that a death had occurred. A saving
      expose fraudsters and bring them        The IFB runs a free and confidential    against his insurers stating that his        was duly recorded of £740,000.
      to justice, recovering fraudulent       “Cheatline” for anyone who has          vehicle had been stolen when he was
      monies paid out and seeking             information on insurance fraud:         in Europe. The caller advised that
      criminal prosecution.                   www.insurancefraudbureau.org/           the vehicle had been deliberately
          Induced motor accidents are an      report/ or 0800 328 2550. It has        left in Europe with the intention
      example of organised fraud. This        scored some notable successes:          of defrauding the insurance
      is where an innocent motorist is                                                company. Additional enquiries were
                                                                                                                     August/September 2009
                                                                                                                                  Hot topic


                                                                                                                    His contents policy restricted payment
                                                                                                                    for stolen cash to £500, and so, feeling
                                                                                                                    aggrieved, he falsely claimed for other
                                                                                                                    items to try to get his money back.
                                                                                                                       When detectives tracked down the
                                                                                                                    burglar, he admitted taking the cash
                                                                                                                    and a ring but not a watch or a second
                                                                                                                    ring, which the owner claimed were also
                                                                                                                    stolen. When questioned he admitted
                                                                                                                    lying about the claim to try to recoup his
                                                                                                                    money.
                                                                                                                       The man was cautioned by police and
                                                                                                                    paid back the genuine and false claims to
                                                                                                                    a value of £11,000.
                                                                                                                       The ABI confirms that fraudulent claims
                                                                                                                    were most common on home insurance,
                                                                                                                    with 55,000 false or exaggerated claims
                                                                                                                    detected in 2008. False motor insurance
                                                                                                                    claims were the highest by value, at
                                                                                                                    £360m. One of these cases involved an
                                                                                                                    owner who reported his car stolen from a
                                                                                                                    car park. Later, he admitted he had pushed
                                                                                                                    the car over the cliff and planned to use
   John Beadle, chairman of the                 prosecute these fraudsters is creating a                            the insurance payout to pay off his debts.
IFB, comments: “The criminal gangs              real deterrent, as is the general public’s                             Nick Starling, ABI director of insurance,   21
targeting honest motorists are ruthless.        support in reporting suspected fraud                                said: “Fraud thrives in a recession, so
Innocent lives are being put at risk. Left      to the Bureau. Insurance fraud is not a                             insurers are intensifying their crackdown
unchecked these criminal networks grow          victimless crime and the criminals must                             on insurance cheats.” J
rapidly, split and even franchise smaller       be brought to justice.”
networks, which in turn grow prolifically.         You catch a sense of how a personal                              Remember – you can participate in the
The key to success is collaboration             lines fraudster’s logic might operate                               this debate NOW by simply logging on to
between the insurance industry, police,         from the tale of a man who had a ring                               www.cii.co.uk/journalhottopics,
public bodies and the public itself. The        worth £2,000 and £6,000 in cash stolen                              where our panel of experts (below) will
growing appetite of police forces to            from his home in Leeds in October 2008.                             respond to your questions and comments




Christian Aplin is Cunningham Lindsey’s head           David Phillips is counter fraud specialist at         Bobby Gracey is vice president of global
of investigation services                              NFU Mutual                                            counter fraud solutions at Crawford &
Within the claims arena, the impact of the             Combating fraud is everyone’s responsibility, be      Company
recession on fraud is receiving a lot of attention.    it the claims handler detecting the inflated or       Where there are volume claims, there is also
With need being one of the big drivers of fraud,       fictitious claim, or the underwriter who ensures      volume fraud – and we should be under no
it stands to reason that there will be more of it      the fraudsters do not get a foothold at inception.    illusion about the commercial impact that claims
during hard times. We have certainly seen an           There is a worrying trend that fraudsters are not     fraud costs can have on the profitability of an
increase. But it’s not just about trying to quantify   only using policies to create fraudulent claims       organisation. It is crucial that insurers develop
how the economic climate might drive fraud             but also to support fictitious identities. Claims     best practice and implement global fraud
upwards, it’s also about taking steps to prevent,      handlers are often aware of these scams through       strategies while aligning the strategies to robust
detect and contain the risk. Businesses need to        their industry contacts, and underwriters have        operational responses. We should never forget
be ready to tackle fraud whether it is motivated       also got to be able to share their intelligence and   that every victory for a fraudulent claimant or
by financial hardship or just plain greed.             know how to counter the threat.                       criminal is a defeat for the honest policyholder.

								
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