RISING INSURANCE FRAUD

There are a number of factors at play in the global economy right now that should prompt insurers to fear a heightened fraud risk in the months ahead. Inflation is rising, driven by food and fuel prices; cost-of-living pressures are squeezing household and business budgets alike. And many Western governments are beginning to question the long-term sustainability of domestic support packages, like subsidies or handouts offered during the pandemic or in response to the war in Ukraine.

In desperate times, some fraudsters will turn to desperate measures.

“We know from previous experience that when there is financial hardship, the volume of fraud increases, so we expect to see that happen as we face the latest challenge,” says Clare Lunn, Head of Fraud at UK-based insurance company Markerstudy. Lunn has over 20 years’ experience in the industry, including chairing the General Insurance Fraud Committee for over three years.

Nigel Cannings, CTO at Intelligent Voice, is an expert in insurance technology that can help revolutionise the industry – including detecting fraud. He concurs with Lunn about the nature of the threat we’re facing: “Unfortunately, in a recession, there is always an increase in fraud,” Cannings tells InsurTech Magazine. “There was a reported 17% increase in 2022, which was itself 11% above pre-pandemic levels. Surveys have shown that during a recession, people’s willingness to exaggerate claims does increase, although the number of people who view insurance fraud as a completely victimless crime does seem to be decreasing.

“Fraud increase in a recession, however, does not seem to be completely linked

CLARE LUNN HEAD OF FRAUD, MARKERSTUDY

to insurance fraud claims, but also to an increase in online crime. With banks getting tougher on frauds like ‘card-not-present’ fraud (which decreased 6% in 2022 in the UK), it seems people may be falling victim to get-rich-quick schemes as a means of trying to escape from those economic woes. People are more likely to ignore warning signs in the hope of getting money quickly, when unfortunately these schemes are being promoted by fraudsters. Also, there is an increase in ‘ghost broking’ on social media, with fraudsters selling cheap-seeming insurance that is actually worthless.”

What scams should insurers be aware of?

It’s not just an uptick in fraud, prompted by the current economic doom-and-gloom, that insurers need to look out for: one trend on the rise is that of quote manipulation.

“Quote manipulation is a form of fraud where consumers deliberately misstate key facts as they shop online for insurance,” explains James Burton, VP Product Management for LexisNexis Risk Solutions Insurance in the UK & Ireland.

“It is a significant and growing challenge. Our study found 21% of consumers think it is completely acceptable to manipulate