Fraud and cybercrime are once again under the spotlight, with Tesco Bank’s chief executive blaming “a systematic, sophisticated attack” for the money taken from 20,000 current accounts. The sobering fact is that these sorts of things do not just happen when we read about high profile cases. Fraud costs insurance companies, and those who pay insurance premiums, billions of pounds every year.

The Fraud Statistics

Fraudulent claims, by their very nature, are difficult to identify and cut across every type of insurance, they are intended to be subtle and well hidden. Fraud ranges from failure to disclose claims history and exaggeration of a genuine claim by adding extra items, through to highly organised claims such as the well-publicised Crash for Cash rings that engineer often dangerous road accidents and then claim for fictitious injuries. The 2015 statistics are sobering reading:

  • Insurers detected more than 130,000 fraudulent claims, equivalent to 2,500 a week, up 6% on 2014. These frauds were valued at £1.3 billion, down 3% on 2014.
  • There was a significant rise in dishonest liability insurance claims detected, such as fraudulent Slip and Trip claims. The number, at 26,900, increased by 36%, and their value, at £391 million, was up 14% on 2014.
  • Dishonest motor claims remained the most common frauds and of highest value – 70,000 detected, down slightly at 2% on 2014, with a value of £800 million, down 10%.
  • While the value of property frauds uncovered continued to fall, down 2% to £107 million on 2014, the number of detected frauds at 27,500 rose by 7%.

At the time these figures were released, James Dalton, ABI’s Director, General Insurance Policy, said: “Insurance cheats do not lack nerve or ingenuity, which is why there will be no let-up in the industry’s commitment to protect honest customers…”

How to protect against fraud and cybercrime.

The simple answer is vigilance and common sense, but as one avenue is closed, criminals will find another. In today’s world, the right use of technology is essential. Information sharing is an important step in the battle against fraud.

Insurance industry initiatives include:

  • The Insurance Fraud Bureau (IFB) – a not-for-profit organisation specifically focused on the detection and prevention of organised fraud.
  • The Insurance Fraud Enforcement Department (IFED) – a specialist police unit dedicated to prosecuting insurance fraudsters.
  • The Insurance Fraud Register (IFR) – an industry-wide database of known insurance fraudsters.
  • The MyLicence data sharing Government initiative which will help to tackle application fraud in motor insurance..

These initiatives are to be applauded, but are not enough in themselves. Insurers need to improve their own anti-fraud solutions as well as having the system flexibility that enables them to access and use the shared industry intelligence in their claims process.

Identifying fraud certainly depends on vigilance and common sense, but these individual skills have to be supplemented by robust systems that can interrogate both industry data and internal data and then instantly flag trends and anomalies.

The cost, to an insurer, of fraudulent claims is not just in the payouts it has to make. As the recent Tesco Bank case demonstrates, a reputation can be tarnished and business lost when the public hears that a trusted organisation has allowed itself to be the victim of fraudulent activity. Consumers soon pay attention when they appreciate that they are the real victims. In the case of insurance, programs like BBC’s Claimed and Shamed spell it out explicitly to the consumer: your premiums are increasing to pay for the undetected fraud of others.