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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