Modern Claims Magazine Issue 13 Fraud Supplement by Charlton Grant

â&#x20AC;&#x153;We as an industry are totally united in our wish to see less fraud and fraudsters taken out of the systemâ&#x20AC;? Donna Scully, Carpenters

Fraud: Gaining ground? Modern Claims talks to practitioners and experts from across the claims sector, to gauge perspectives on fraud, including the potential impact of the General Election, whether the industry really is working in a more collaborative way, and how the very nature of insurance fraud is changing.

Fraud Supplement 2015

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THE EDITOR’S OVERVIEW W

elcome to the latest of Modern Claims’ special supplements.

Our focus for this edition is Fraud in the claims industry and whilst putting this supplement together, I have had the pleasure of speaking with leaders in the field. Our cover star is Donna Scully, Partner at Carpenters and access to justice champion. I spoke to Donna about why taking lawyers out of the equation in low value claims is a threat to justice, and asked her about the challenges of running a business in the wake of ‘rushed’ reforms (see the full interview from page 6). I also spoke to Bobby Gracey, the Chairman of the Chartered Institute of Loss Adjusters’ (CILA) Anti-Fraud Special Interest Group (SIG), about working with the rest of the industry in the fight against fraud (page 10-13). Finally, I caught up with the ABI’s Fraud and Financial Crime Manager, Mark Allen about why insurance fraud has become such a broad issue in the UK, and whether the industry is gaining any ground (coverage from page 15). Our feature writers for this edition tackle everything from technology in the battle against insurance fraud and the new askCUE service, to understanding the psychology of fraudsters, and how this knowledge could help prevent fraud in the future. I hope you enjoy this supplement and that it provides a degree of additional insight into this very important area for claims professionals. Thank you to all our contributors and in particular, to our sponsors, Carpenters. If you have any feedback on this supplement or ideas for a future edition, please get in touch via the details below, as I’d love to hear from you.

Charlotte

Charlotte Parkinson Group Editor, Modern Claims Magazine 01765 600909 | charlotte.parkinson@charltongrant.co.uk

Modern Claims Magazine - May 2015 Project Director Kate McKittrick kate@charltongrant.co.uk Group Editor Charlotte Parkinson charlotte.parkinson@charltongrant.co.uk Business Development Manager Martin Smith martin@charltongrant.co.uk Project Manager Ben Longbottom ben.longbottom@charltongrant.co.uk

05-18 THE INTERVIEWS 06 Interview with...Donna Scully

Charlotte Parkinson, Modern Claims spoke to the Partner at Carpenters about what impact a new Government could have on access to justice and threats to the wider industry moving forwards.

11 Interview with...Bobby Gracey

Charlotte Parkinson, Modern Claims, spoke to the Chairman of the Chartered Institute of Loss Adjusters’ (CILA) Anti-Fraud Special Interest Group (SIG) about adopting a collaborative approach to fraud and protecting the rights of the honest consumer.

15 Interview with...Mark Allen

Charlotte Parkinson, Modern Claims spoke to the Manager, Fraud and Financial Crime at the Association of British Insurers (ABI) about new and existing initiatives to tackle fraud in the UK, and his thoughts on a collaborative approach to fraud.

19-31 THE Features 21 askCUE, is it all its cracked up to be?

Alan Nesbit takes a candid look at askCUE, the new enquiry service which allows approved organisations to check records held on the CUE PI database, before they submit a personal injury claim through the Claims Portal, and asks if there are any real benefits.

22 Prevention is better than cure: technology vs. insurance fraud

Matt Stanton explains why, in order to effectively tackle insurance fraud, a multi-layered approach is a must.

24 An Expert Witness View - Low Velocity Impact

It appears to be a term which has come about to suggest that an impact velocity between vehicles was insufficient to have caused personal injury to the occupants, albeit that liability is admitted. On what basis then is such a statement made? Is it that the injured party maybe fraudulently claiming for his own financial gain or is it to persuade the non-fault party to accept a lower settlement figure? Nik Ellis reports.

26 Stick or Twist

Peter Oakes outlines the new challenges facing the insurance and claims industry when dealing with fraud.

29 A new approach to tackling fraud

Tara Shelton explains why understanding the psychology of those willing to commit fraud is the key to preventing fraudsters slipping through the net.

31 Pain Syndrome – Real or Not?

Whiplash Can Result in Pain Syndrome

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The Interviews

05-18

The Interviews

‘[The Government] rush reforms in, which means they don’t work properly, and just leave those on the ground to “get on with it” ‘

Interview with... Donna Scully

Interview with... Donna Scully Charlotte Parkinson, Modern Claims spoke to the Partner at Carpenters about what impact a new Government could have on access to justice and threats to the wider industry moving forwards.

Q A

What impact could the General Election have on insurance fraud and access to justice?

A change of Government would, in my view, have a big impact on access to justice. This Government has not shown a huge regard for it and the hope is that if Labour get into power, they would have. I have lobbied under this Government, and Labour and I felt that Labour had more regard and understanding about why access to justice is so important and why financial means shouldn’t be a bar to it. In terms of fraud, this Government has shown a willingness to tackle fraud as part of the so called “Compensation whiplash culture”, but my concern has been that they have a very gung-ho way of dealing with things, for example, MedCo. They appear to be like a bull in china shop in the way they decide quickly (and sometimes without understanding) what the problem is and how best to tackle it. They fail to consult properly and their impact assessments have been very poor to date. They rush reforms in, which means they don’t work properly, and just leave those on the ground to “get on with it”. I’d like to see that stop if there is a new Government.

Are industry organisations, such as MASS and APIL, lobbying the Government hard enough in relation to the preservation of access to justice?

Yes they are but this Government hasn’t been listening, and it has had a majority so if it wants to implement something unpopular, for example the Legal Aid Sentencing and Punishment of Offenders (LASPO) Act, it can. It feels like they make their mind up first, then consult and then do what they wanted to do anyway. You do not feel like they genuinely listen to the experts and those on the ground. That is very frustrating for the likes of MASS and APIL but it doesn’t stop them fighting the corner of ordinary injured people and pressing how important access to justice is for them. This Government appears to have plenty of time to see and listen to the likes of the ABI but not for those who represent victims of accidents. The Transport Select Committee (TSC) has been helpful in the fight for justice over the last 5 years because when they consultant and publish their reports and recommendations, they do it properly and they do engage, listen and take on board what the experts in the field have to say. Some of their recommendations over the years have been very helpful in preserving access to justice and thankfully, the Government has listened to them. Do you see insurers, claimant lawyers and the Government working collaboratively to fight fraud in the future?

I sincerely hope so, it has to be the way to go. It took the Claimant community over 4 years to get the Claims Underwriting Exchange Personal Injury (CUEPI) set up and that goes live soon. It is merely a stepping stone though and we need to build on it by working further together and sharing more data to jointly fight to reduce fraud. Working collaboratively is, in my view, a ‘no brainer’. We as an industry are totally united in our wish to see less fraud and fraudsters taken out of the system. It makes for a better system for genuine people. We have a duty to do it. What is your view on the work of the Insurance Fraud Bureau (IFB), and the Insurance Fraud Enforcement Department (IFED)? I am hugely impressed with the work the IFB and IFED do to tackle fraud and prosecute fraudsters. It shows that the Insurers are prepared to put their money where their mouth is in tackling fraud and seeing those who perpetrate fraud, punished. I have huge respect for both organisations and the claimant community would like to work more closely with them to support them in their fight against fraud. Carpenters welcomed Ben Fletcher from the IFB to our offices recently to show him what it is like on the ground of a claimant firm and how hard we try to screen potential fraud out as early as possible. It was a very fruitful experience for both of us.

Q A

MC // Fraud Supplement 2015

Interview with... Donna Scully

‘The Transport Select Committee (TSC) has been helpful in the fight for justice over the last 5 years because when they consultant and publish their reports and recommendations, they do it properly and they do engage, listen and take on board what the experts in the field have to say’

Q A

What have been the biggest challenges faced by claimant solicitors over the last 12 months and why?

There have been many challenges back to back over the last 4-5 years but in the last 12 months we have had to deal with day to day reforms which happen in our industry constantly. We found out that credit hire wasn’t going to be tackled in a constructive way by the Competition Commission after years of investigation so that was an opportunity missed. We’ve seen positive things like the banning of incentives by solicitors which was long overdue. MedCo has been on the horizon for the last year too and whilst the idea and thinking behind it might be admirable - i.e. to stop conflicts between those instructing the doctors and the doctors themselves, the reality is it will not do that and it is, putting it bluntly, a complete mess from everybody’s perspective, mainly the poor injured person. It’s difficult running a business when you face rushed and unworkable reforms constantly. It’s something that needs to stop if we are to be able to put clients at the centre of the claims process and do a good job for them. Aside from fraud, what are the biggest threats to access to justice?

Q A

The ABI are very vocal about their wish to see lawyers out of the picture on what they call ‘low value’ PI claims. They are always pushing for a rise in the small clams limit. That is a big threat to Justice for sure but also a big threat to the professionalism of our industry too because if you do raise the limit, CMCs will move in and represent clients,

‘I am hugely impressed with the work the IFB and IFED do to tackle fraud and prosecute fraudsters. It shows that the Insurers are prepared to put their money where their mouth is in tackling fraud’ MC // Fraud Supplement 2015

Donna Scully Donna has been a passionate campaigner for the rights of accident victims throughout her career and she has fought against policies and practices that could negatively impact on claimants and their access to justice. She joined the Motor Accident Solicitors Society’s management committee in 2004 and her experience, enthusiasm and dedication, saw her elected as MASS Chairman for a two-year term in 2010. While leading MASS, Donna headed up the campaign against the Government’s patchwork of reforms to the civil justice funding system that threatened to reduce access to justice for victims. Donna is also a prominent industry figure in the fight against fraud, working to combat fraud in more collaborative way since 2010 when she established a Fraud Forum at MASS. She received the ‘Outstanding Achievement of the Year’ award at Claims Magazines 2014 PI Awards for her continued efforts to work collaboratively across the industry to combat fraud, cut out bad practices and rally all parties in the claims process to present a united front against fraud. From the launch of the Insurance Times’ Fraud Charter in 2012 Donna has held a seat on the advisory board and is also a member of the editorial board for Modern Claims Magazine, as a specialist in the effects of LASPO and other reforms on the PI sector. She also sits as an Ambassador on the Advisory Board of I Love Claims, since its inception in 2010. Originally from Dublin, she moved to the UK in 1985 and worked with various law firms before joining Carpenters in 1997, where she set up a specialist Personal Injury department. Established in 1994, Carpenters is a complete claims and legal solution and a market-leading provider of claims services to the insurance industry and their customers with a reputation for an ethical approach to personal injury claims. Donna has 14-year-old twin boys who love sport, so that keeps her busy outside of work.

Interview with... Donna Scully

taking a chunk of their damages. The downside of that is that I see a huge rise in claims being pursued under the ‘why not, there are no costs sanctions’ mentality. Clients will not receive the same service they do now from independent lawyers and they will just become a ‘commodity’ at the hands of some unscrupulous CMCs who are out to push claims and make money. It’s a Rule of Natural Justice that both sides should be represented, so it is totally unfair to me that the Insurer will have expert advice and support and the lay client won’t. A David and Goliath situation, which won’t be fair or just. I have not heard anybody in our market saying that raising the limit is a good thing, other than the ABI and I wonder why they think it? Perhaps they need to engage with their membership more to get their views.

‘It’s difficult running a business when you face rushed and unworkable reforms constantly’

Q A

How have developments in the sector over the last 3 years affected solicitors as well as claimants? Reforms and developments over the last 3 years have meant that lawyers have had to adapt to the changes to make sure they can still provide a good service to clients. If you are very organised, have good technology and systems, then the changes are manageable and workable. If you are not, then it is a lot tougher. I hear evidence now coming through that Joint Venture ABSs set up as a result of LASPO are not working so well and were, perhaps not ideal in that they are expensive and cumbersome and much harder work to run than was anticipated. It will be interesting to see what happens over the next year now LASPO is over 2 years old and the Legal Services Act has been around for some time too. A huge frustration lawyers have is how slow the SRA are to deal with bad practices that some disreputable firms have adopted post-LASPO. I assume it’s due to lack of resources

but I’d really like to see the Regulator do more to help clean up our industry and take a stand. What is Carpenters doing in relation to the fight against insurance fraud? Carpenters have always been very active in fighting fraud. Indeed the IFB visited our offices recently to see what we do and how it works. Ben Fletcher from the IFB was surprised how much work we do to screen against fraud at the outset of a claim and then all the way through the claim too. We have developed our own database and conflict checks and we have a dedicated experienced fraud team who handle any claims we have concerns about. We also have very good working relationships with a lot of Insurers so that if there is an issue on a case, they will contact us about it and we can try to work together to sort it out. The way we tackle fraud at Carpenters saw me setting up the MASS Fraud Forum in 2011 when I was Chair of MASS. This Forum, together with other members of the claimant community was instrumental in the soon to be introduced data sharing, via ask CUEPI. What’s next for Carpenters and what are your hopes for the coming year? To build on what we have; to keep trying to do better, be more efficient and to innovate. We don’t like to stand still and we always want to push the boundaries to do the job better and to offer our clients more. We also have plans for growth; we are expanding into more office space and our staff numbers are growing too. In the last 12 months we opened in the South of England and Scotland so now we have integrated our new offices into Carpenters, we may look beyond that. We have a very dynamic Management Team so we are always excited to look to the future.

Q A

Carpenters Carpenters is a leading provider of claims services to the insurance industry and their customers. The range of services extends from receiving notification of a cracked windscreen at one end of the spectrum, to the conduct of a multi million pound catastrophic injury claim at the other. The focus throughout our range of services is the experience of the customer. We understand that individuals involved in an accident often require time and attention in what can be confusing circumstances. We are acutely aware that we are representing our insurance clients when dealing with their customers, and at all times seek to enhance the brand and reputation of our insurance partners. On the insurance side we have a market leading, in-house 24/7 white labeled FNOL unit. The FNOL service is complemented by a fully outsourced claims handling service with real time online access to individual claims and claims MI. On the legal side, Carpenters have built a reputation for an ethical approach to personal injury litigation ensuring that the individual receives the best possible advice and the maximum compensation possible. We have a strong team of experienced lawyers who provide jargon-free advice in a customer friendly fashion.

MC // Fraud Supplement 2015

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Interview with... Bobby Gracey

Interview with... Bobby Gracey Charlotte Parkinson, Modern Claims, spoke to the Chairman of the Chartered Institute of Loss Adjusters’ (CILA) Anti-Fraud Special Interest Group (SIG) about adopting a collaborative approach to fraud and protecting the rights of the honest consumer.

Q A

Why did the Chartered Institute of Loss Adjusters (CILA) decide to establish an Anti-Fraud SIG?

The CILA created 11 Special Interest Groups, including the Anti-Fraud SIG, in 2005. The purpose was to enable all members to be associated with those who are practising in, and have expertise in, one of the specialist claims areas. Today, nearly 450 CILA members are part of the Anti-Fraud SIG where they share best practice, seek advice in a non-competitive environment, access technical publications and speak to leaders in the field. The Anti-Fraud SIG liaises with various industry groups, including the ABI Anti-Fraud Committee on benchmarking fraud performance, the Insurance Fraud Bureau and working with the police. In addition, the group responds to the consultation process of, for example, the SIA following the introduction of the Security Industries Act. Internally, the SIG regularly reviews the CILA exam syllabus to ensure that the Institute’s qualifications include the right technical information on fraud, for example, legal definitions, relevant case law. The SIG’s involvement with other industry qualifications has helped members with these qualifications to embark on their qualification journey with the CILA.

Why did you want take the position as Chairman of the SIG?

which is highly regarded and keeps me in touch with adjusters and claims professionals who deal with fraudulent claims on a day-to-day basis.

Q A ‘Public perceptions about combating fraud also need to be addressed, as many consumers do not believe that any real progress has been made’

Nearly four years ago, I was asked to take over from Robin Wintrip as Chairman of the SIG. I was delighted and honoured to do so and jumped at the chance! I am passionate about fraud so to work with a fantastic group of professionals who are also very passionate is a pleasure. The position of Chairman of the Anti-Fraud SIG is a voluntary one

How does the SIG liaise with organisations such as the ABI’s Anti-Fraud Committee?

Working with other organisations involved with fraud can be challenging when sharing best practice and data within the confines of the data protection act. The key is to look beyond this and centre on what’s best for the customer. Over the past few years, we have worked on a number of projects with the ABI’s Anti-Fraud Committee, such as best practice, and have developed a good working relationship with them. In fact, one of their members is joining our next SIG meeting, which will be mutually beneficial to both groups.

How has fraud in the industry changed since the SIG was established, and over the last few years, in light of regulatory/ market changes?

Over the past 10 years, the insurance industry has improved its general approach to fraud and has tried to create an anti-fraud culture from the top down. There is more executive buy-in as senior personnel start to acknowledge the relationship between the cost

MC // Fraud Supplement 2015

Interview with... Bobby Gracey

‘An ‘honest consumer’ will pass effective checks, have no red flags against them and present minimum risk, and these consumers’ claims should be paid’ of fraud and loss ratios. Additional resources are now dedicated to combatting fraud and the industry is making better use of technology. Fraud is now a sector within the insurance industry instead of just an add-on to claims. However, the journey isn’t over. Although the industry has made progress in preventative fraud by learning new scams or ploys, or reacting by understanding more in regard to external motivators, more needs to be done and support given by the Insurance Fraud Enforcement Department with regard to opportunistic fraud, which still remains the biggest problem for the insurance industry. Public perceptions about combating fraud also need to be addressed, as many consumers do not believe that any real progress has been made.

Q A

How does the organisation aim to put the ‘honest consumer’ at the heart of what it does by routing out fraud?

The CILA’s ethos is to ensure that members of the public are treated fairly and that their rights and status are protected. When an adjuster undertakes investigative work, often on behalf of insurers, he comes to a fair conclusion about whether a claim is covered by a policy, the quantity of loss or damage, and the amount that should be paid. He is recognised as a professional person of integrity with a high level of knowledge and skills who is subject to a code of conduct, which embraces the principles of impartiality and transparency. The need to act fairly and justly is one of the key requirements of the CILA charter and a core principle of the profession. The institute provides strict guidance to its members on conflict of interest, business ethics and confidentiality. The CILA sets the standards of the profession and protects those standards. The Institute’s associate qualification conferring chartered status is the gold standard in the industry and is respected worldwide.

MC // Fraud Supplement 2015

From an insurer’s perspective, it is important that claims handlers know what ‘good’ looks like. An ‘honest consumer’ will pass effective checks, have no red flags against them and present minimum risk, and these consumers’ claims should be paid. A small percentage of consumers will be referred for further investigation such as social media checks, face-to-face statements, and surveillance.

‘The insurance industry has made tremendous progress but there is still much to be done. We tend to be good at what we know, such as detecting organised fraud, but we need to get much better at opportunistic fraud which is far harder to detect’

Bobby Gracey Bobby Gracey started working in the insurance industry in the early 1990s and over the course of his career, he has focused on working with global customers to develop and manage multi-national investigative programs and cost containment solutions. For the past 15 years, Mr Gracey has held a number of senior global executive positions including Global Vice President for Counter Fraud Solutions at Crawford & Company where he strategically managed that part of their business in 67 countries around the world, CEO for an International forensic business and Executive Vice President for a leading US Claims Investigation company. Eighteen months ago, Mr Gracey set up MolMax Solutions Ltd, a company that provides executive and strategic support to organisations in the UK and Ireland. He also assists various International companies with their business development efforts and expansion plans. Mr Gracey continues to remain active in the counter fraud community. To date he has written three technical books on counter fraud, which are used as key reference materials by operational fraud investigators, the Association of British Insurers, Chartered Insurance Institute and Lloyds of London.

Interview with... Bobby Gracey

‘It remains imperative to have a collaborative approach with all organisations and invite member feedback on a regular basis in order to effectively fight against fraud’ The Chartered Institute of Loss Adjusters (CILA) The CILA is the UK’s leading professional organisation for independent claims specialists. Its members operate under a royal charter to investigate, negotiate and agree the conclusion of insurance and other claims on behalf of insurers and policyholders. CILA’s commitment to setting standards, examinations and professional conduct enables it to support all members across the industry. The institute ensures that all members comply with standards and actively encourages more to achieve advanced levels of technical and professional competence.

‘[The CILA] will try and build even stronger relationships with other industry bodies in order to create a single solution rather than individual strategies to fraud’

Q A

How well has the insurance industry as a whole responded to fraud?

As mentioned, the insurance industry has made tremendous progress but there is still much to be done. We tend to be good at what we know, such as detecting organised fraud, but we need to get much better at opportunistic fraud, which is far harder to detect. Other areas that need addressing include: improving the measurement of fraud by using definitions that are common to all; better incentivisation of adjusters to investigate fraud more thoroughly which can be time consuming and labour intensive; more collaborative training between insurers and adjusters; an industry wide recognised professional qualification in fraud. Does the CILA and other organisations do enough to support the industry/ members in the fight against fraud?

Q A

Over the past 10 years, the CILA’s Anti-Fraud SIG members have been sharing best practice, seeking advice from fraud experts, accessing technical materials and attending and speaking at fraud conferences. But more support is needed: in a CILA survey, our members stated that they would like the industry to do more to share topical news in fraud, trends and examples of good practice. They felt that it was often difficult to locate with ease data, intelligence and guidance on best practice when tackling fraud. In addition, when information was found, it was not focussed on the dayto-day practicalities of adjusting or investigating fraud. A big challenge for the industry is to create one singular best practice as different organisations have varying opinions. But it remains imperative to have a collaborative approach with all organisations and invite member feedback on a regular basis in order to effectively fight against fraud and this approach is at the core of the Anti-Fraud SIG.

Q A

Who is/should be responsible for investigating and tackling fraud and what is the Loss Adjusters role here?

Everyone in an organisation should be fraud aware and those directly involved in the claims process should understand how to detect risk and refer, where appropriate, to a specialist person or team who can take the investigation to a different level. However, not all staff and, in particular, claims staff are given sufficient specialist training to make decisions on potentially fraudulent claims. The loss adjuster’s role, as mentioned previously, is to validate genuine claims - is the claim covered by the policy, what is the quantity of loss or damage and how much should be paid? When risk is detected, the adjuster then refers the claim to a specialist in-house fraud team or to an insurer’s team. What is next for the CILA and the Anti-Fraud SIG?

Q A

Preparations are underway for the CILA’s annual conference in September, which will showcase how the Institute and its members are responding to an ever changing market place. Claims professionals from all sectors of the wider industry will attend this highly informative event. The CILA’s AntiFraud SIG will be represented at the conference where members will share topical news in fraud, trends and examples of good practice. Away from the conference the SIG will continue to work with members in order to remain relevant. And it will try and build even stronger relationships with other industry bodies in order to create a single solution rather than individual strategies to fraud.

MC // Fraud Supplement 2015

Interview with... Mark Allen

Interview with... Mark Allen Charlotte Parkinson, Modern Claims spoke to the Manager, Fraud and Financial Crime at the Association of British Insurers (ABI) about new and existing initiatives to tackle fraud in the UK, and his thoughts on a collaborative approach to fraud.

Q A

How are the ABI currently approaching insurance fraud?

Combating insurance fraud rightly remains an industry priority. In recent years, the industry has invested in several game-changing initiatives, which are delivering a sea-change in the way that insurance fraud is tackled. We are striving to deliver a well-defined and holistic counter fraud strategy, and are making good progress. The Insurance Fraud Bureau has spearheaded the fight against organised motor fraud since 2006, and runs the Insurance Fraud Register on the ABI’s behalf. And the Insurance Fraud Enforcement Department (IFED) continues to lead the national police response to insurance fraud. But we are certainly not getting complacent. We recognise that more needs to be done and work is in hand. Our participation in the Government’s Insurance Fraud Taskforce provides a timely platform for pressing for a legislative and regulatory environment that’s conducive to fighting fraud, not hindering it; a judicial approach that recognises the harm caused by insurance fraud and a claims framework and processes that do not unintentionally encourage spurious claims. There’s a real opportunity for the sector to promote the value of insurance and reappraise the way it communicates with its customers to debunk the myth that insurance fraud is a victimless crime.

Q A

How are the ABI and the IFED working collaboratively?

Having invested significantly to establish IFED, insurers continued investment for a further three years (to end 2017) will enable IFED to bring more fraudsters to justice, particularly on the organised side, given the establishment of a new team to investigate complex frauds, involving professional enablers. A collaborative approach to combatting fraud is essential and is indeed a regulatory expectation of the Financial Conduct Authority. There are numerous examples of how we have worked together successfully, including the development of the annual Threat Assessment and strategies to combat particular types of fraud; awareness campaigns (such as ‘Get A Real Deal’ on ‘Ghost Broking’) and the recent research led by Professor Martin Gill, looking at the psychology of the insurance fraudster.

‘There’s a real opportunity for the sector to promote the value of insurance and reappraise the way it communicates with its customers to debunk the myth that insurance fraud is a victimless crime’ MC // Fraud Supplement 2015

Interview with... Mark Allen

‘The IFR is a flexible tool covering all product lines that insurers can use in a way that best fits their own business needs and counter fraud strategies’

The Insurance Fraud Register (IFR) launched in 2012, how successful-a-tool has this proved to be in the fight against fraud, to date?

The IFR is a powerful new tool in insurers’ weaponry that delivers the functionality that the industry has told us it wants. As well as enhancing the industry’s counter fraud capability, it demonstrates to the general public, the Government and regulators alike that we remain committed to beating the fraudster and protecting our honest customers. The consequences of appearing on the IFR ensure that it is a genuine deterrent to committing fraud. It is equally important that honest customers are reassured that only those that are known to have committed fraud will appear on the register. So, we’ve built a number of safeguards into the IFR’s policies and procedures. Above all, we have ensured that the provisions regarding privacy and data security are robust and transparent. The IFR is a flexible tool covering all product lines that insurers can use in a way that best fits their own business needs and counter fraud strategies. Interest in participating in the IFR remains strong both from ABI members and others. We are

developing proposals to facilitate third party access and to ensure the register becomes an effective frontend prevention measure.

Q A

Why do you feel that insurance fraud has become such an issue across the UK as opposed to other countries?

Insurance fraud remains an ongoing concern across the EU and indeed globally. But it is difficult to make direct comparisons between states due to a number of factors, such as how the markets function; the prevalence of certain product lines and different judicial systems. Moreover, the approach to identifying insurance fraud varies between countries, with different definitions of fraud and methodologies of calculation being employed. The perception that insurance fraud is a victimless crime, the prevalence of whiplash often fuelled by CMCs, and the fact that much insurance is sold via the internet in the UK market (which heightens the risk of application fraud), all contribute to the scale of the problem in the UK. Moreover, the UK insurance sector has implemented more robust counter-fraud defences than many EU States, which could mean that proportionately more insurance fraud is detected in the UK.

The Association of British Insurers (ABI) The ABI is the voice of insurance, representing the general insurance, protection, investment and long-term savings industry. It was formed in 1985 to represent the whole of the industry and today has over 300 members, accounting for some 90% of premiums in the UK. The ABI’s role is to: • Be the voice of the UK insurance industry, leading debate and speaking up for insurers. • Represent the UK insurance industry to government, regulators and policy makers in the UK, EU and internationally, driving effective public policy and regulation. • Advocate high standards of customer service within the industry and provide useful information to the public about insurance. • Promote the benefits of insurance to government, regulators, policy makers and the public.

MC // Fraud Supplement 2015

Q A Q A

How much is the ABI currently investing per annum in the fight against fraud?

t is conservatively estimated that the industry is spending at least £200m pa on counter fraud initiatives. Do you feel that the industry is gaining ground against fraudsters or is there still a long way to go?

The industry has come a long way in the last ten years or so. Aside from the introduction of big-ticket initiatives, there are now more dedicated fraud teams and a heightened awareness of the fraud risk throughout insurance businesses, which has increased the sector’s resilience to fraud. However, we are alive to the fact insurance fraudsters are mobile. They are not product –loyal and will typically follow the money, taking the path of least resistance. So, we recognise the need to identify new typologies of fraud and methods for carrying them out. The IFED Threat Assessment plays a key role in identifying the current level of threat posed and identifying future trends. While we are doing all that we can to combat fraud, more action is needed elsewhere, for example to disrupt the lifestyles of organised

‘While we are doing all that we can to combat fraud, more action is needed elsewhere, for example to disrupt the lifestyles of organised fraudsters through confiscating their assets, which are often used to fund other serious criminal activity’

Interview with... Mark Allen

‘We have noticed that fraudsters who have been involved in organised motor frauds are migrating into linked areas such as industrial deafness and ‘trip and slip’ frauds’ fraudsters through confiscating their assets, which are often used to fund other serious criminal activity. So we support Government action to improve the asset recovery system.

Q A

Currently, how much do you believe insurance fraud costs consumers per annum?

We estimate that insurance fraud adds around £50 to each household’s annual insurance bill.

As well as the financial impact on the premium-paying public, insurance fraud can inflict physical harm and emotional distress; lead to prosecution of innocent motorists (who are victims of ‘Ghost Brokers’); waste NHS and emergency services resources; fetter court time and finance other serious criminal activity.

Q A

Have you noticed a marked shift in the types of insurance fraud being committed? I.e. opportunistic vs. organised crime.

Insurance fraud cuts across every type of insurance. Emerging trends include organised industrial disease (notably Noise-Induced Hearing Loss); and psychological injury. Data vishing and claims farming (often linked to data theft) of aged personal injury claims is intensifying. Professional enablers continue to pose a significant threat. We have noticed that fraudsters who have been involved in organised motor frauds are migrating into linked areas such as industrial deafness and ‘trip and slip’ frauds.

Q A

How detrimental is fraud to the genuine claimant?

Honest policyholders are rightly sick of footing the bill created by the fraudster in terms of paying higher premiums, and shouldn’t have to do so. While we are doing all that we can to weed-out fraudsters, we have to balance this against the fact that most claimants are genuine and will receive great service, be treated fairly and get their bonafide claims paid expeditiously.

We should also not lose sight of the severe and long-lasting consequences of being caught committing insurance fraud. These include not only getting a criminal record and a possible custodial sentence, but also the adverse impact on family relationships, future job prospects and access to vital financial services such as mortgages and loans.

Q A

What is next for the ABI in the fight against fraud?

We will continue to work collaboratively with our strategic partners, including the IFB and IFED, to develop the industry’s counter fraud strategy. Many industry-led data sharing initiatives, which operate with clear, consistent and robust governance frameworks, have the potential to evolve further. Work is being undertaken to improve, where possible, data integrity and availability of data, including at the application stage. The Insurance Fraud Bureau’s (IFB) five year strategy will see it broaden product lines under management and establish a centralised intelligence hub, realising cost and efficiency gains and mitigating potential regulatory and reputational risks. Continued investment in the Insurance Fraud Enforcement Department (IFED) will enable it to continue to lead the national police response to insurance fraud. Aside from data sharing within the insurance sector, we urge the Cabinet office to take forward the Counter Fraud Checking Service to facilitate a genuine two-way flow of information and intelligence between the public and private sectors, including DWP, HMRC and banks to name but a few.

Mark Allen After beginning his career in the legal profession, Mark has worked for the ABI in a variety of roles. As Manager, Fraud and Financial Crime, he is responsible for the implementation and oversight of major insurance counter fraud initiatives. He is a member of the Steering Board, which oversees the Insurance Fraud Register and sits on the Management Board of the Police Insurance Fraud Enforcement Department. He also represents the insurance sector on a number of external bodies, including the Government Insurance Fraud Taskforce. Mark is also responsible for developing industry policy on wider financial crime issues, including antimoney laundering.

We will also look to build upon the reforms to the Civil Justice System in England and Wales and will continue to press for further reforms to reduce third party bodily injury fraud. The time is also right to evolve the industry’s communications strategy to ensure that our anti-fraud messaging is targeted and hard-hitting, with a view to raising awareness of the consequences of insurance fraud for victims and perpetrators alike.

MC // Fraud Supplement 2015

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MC // Fraud Supplement 2015

The Perfect Recipe

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The Features

askCUE, is it all its cracked up to be?

must start first of all by congratulating the efforts of MASS and APIL in pressuring the government and the ABI to allow us at least a modicum of information that is freely available to the insurers. It has been a long and difficult journey and special praise must go to Donna Scully and Craig Budsworth who have been at the forefront of the battle. It is most certainly an achievement to have gained even this small ground in the battle for information. Nevertheless, before we get too excited about it, what is askCUE really going to achieve? Let us start by examining what happens and what it does. From 1st June, it will be a requirement to include a unique reference on the Claims Notification Form (CNF) to show that you have searched your client on the askCUE database. The cost is reasonably priced as services of this type go, at £110 plus VAT per 12 months. The Claimant’s solicitor will after obtaining the Claimant’s consent, enter the full name, address, date of birth and National Insurance Number and in return receive a number of accidents that the database holds that the Claimant has been involved in within the last 5 years.

‘If the Claimant comes back with an answer different to askCUE as to number of accidents, and the previous solicitor is not prepared to continue with the claim, what is to stop that Claimant going to another solicitor and having his details run again’ So now we know what it does, is this actually helpful, does it raise more questions than answers and will it impact Access to Justice in a positive or negative way? Are there any real benefits? Firstly is it helpful? That is a tough question and it really depends on the type of work you are doing. For what I call “vanilla work”, which is LEI based clean work, it probably

acts as another layer of bureaucratic red tape and expense that is required to further shave something off the thin bottom line that already exists. It may also help flag up the very few and far between potentially fraudulent cases that may come into such a file load. However, a very cautious approach needs to be taken as it is not clear exactly what information askCUE will provide, if it is just a number of accidents, it may include accidents other than Road Traffic Accidents. It may not include fault accidents for which the Claimant has not made a claim (but actually was injured). All of this means that if the answer that askCUE gives is different from the answer that the Claimant provides it could cause a variety of different problems, depending on the appetite for risk that the individual firm has. If this is a step in a process for a high-volume practice, one wonders how much time and effort will be taken to understand what the potential differences are between the Claimant’s answer and the askCUE answer. What is fairly certain is that those cases with a higher than average number will probably receive allegations of fraud and will drop out of the portal. It is also fairly certain to my mind, that there will be a number of firms who, in the same way as they have thresholds for the number of people in a vehicle and the time of day claims occurred at, will also have a threshold for number of accidents that a person has had in the last five years. This could mean a significant number of people will have problems finding a solicitor to deal with their case, in the same way as certain sections of society currently have those issues, creating increased downward pressure on Access to Justice. Further issues in the pipeline... Finally, there is the fraud angle. It is clearly necessary that askCUE is searched prior to putting in the CNF. If the Claimant comes back with an answer different to askCUE as to number of accidents, and the previous solicitor is not prepared to continue with the claim, what is to stop that Claimant going to another solicitor and having his details run again, except that this time the Claimant knows the answer? This could make it easier for fraudsters to bring a veneer of truth to their claims. What would be much more helpful would be a list of the accidents, with dates and parties, possibly even the previous solicitors who dealt with the case. What would be most helpful of all would be confirmation of which if any of these accidents had been successfully repudiated. I’m not however holding my breath. Until we get this kind of information, unfortunately I can see askCUE only creating further problems. Alan Nesbit is Managing Partner at Nesbit Law Group LLP, specialist Allegation of Fraud Claimant Solicitors. MC // Fraud Supplement 2015

The Features

Prevention is better than cure: technology vs. insurance fraud Matt Stanton explains why, in order to effectively tackle insurance fraud, a multi-layered approach is a must.

s we move ever further in to the digital age and step closer to a truly hyperconnected world, the number of touch points between companies and customers (both prospective and established) is increasing, and the insurance sector is no exception. Unfortunately, these new contact points can be exploited and the anonymity of the Internet makes it ever easier for opportunistic individuals and organised criminal groups to engage in fraudulent activity. It is, therefore vital that insurers invest in new and emerging technologies to enhance their prevention strategies in order to mitigate the risk of exposure and, where possible, maintain a competitive advantage within the industry. Prevention is better than cure Whilst loss values may only be realised at claim stage, fraud prevention strategies should not simply focus here. Prevention is always better than cure and it is much more beneficial to remove risk at the earliest possible stage, thus mitigating the chance of a claim and a resulting loss becoming reality. Technology now exists to enable early defences to be placed at point of sale and inception, but more importantly, they can be leveraged during quotation as well. The incorporation of risk indicators within a real time decision engine can help to prevent undesirable business from being written. Furthermore, an enhanced risk assessment within a company’s rating engine ensures that good customers can be provided with accurate and preferential rates, while high risk business can be removed or priced appropriately. Look at the bigger picture The use of advanced and sophisticated tools is absolutely vital to ensure that a full understanding of all parties and attributes is established, to provide the best possible chance of predicting future fraudulent or adverse behaviour. Therefore a holistic approach, incorporating the widest possible range of data within a consolidated, easy to use solution is imperative. Historically, many fraud prevention solutions have been limited to the inclusion of data, which is captured within the lifecycle of a customer’s policy (from sale to claim). Additional information would then be accessed manually, outside of the solution, as part of the investigation. An MC // Fraud Supplement 2015

increasing amount of intelligence is now being digitised, thus making it more readily available, and organisations are looking to make use of this within their overall strategy. Information relating to previous claims histories, driving entitlements, prior convictions, and property and ownership details enhance the overall picture of an individual and play a key role in highlighting instances of misrepresentation or first party fraud, where the policyholder is complicit in the adverse activity. Furthermore, other key data repositories, such as intelligence from crime prevention agencies, regulatory lists, government and corporate information, can be used to establish the overall risk profile. At a claim level, professional registers can also be leveraged to validate third parties such as Doctors and Solicitors. Validating a customer’s identity at the outset of a relationship (and ideally before it even commences) helps to confirm that an organisation is doing business with the correct individual, reducing the risk of impersonation, and ensuring that good customers get the best possible experience. Forming a single customer view can also be very powerful, again validating good customers, whilst ensuring that a full view of risk is established. At point of claim, conducting verification checks (where possible) and referencing all available datasets in relation to third party claimants is important, as no prior due diligence will have been conducted.

‘Validating a customer’s identity at the outset of a relationship (and ideally before it even commences) helps to confirm that an organisation is doing business with the correct individual, reducing the risk of impersonation’ Share and share alike Information sharing across communities also provides very powerful predictors. A number of consortia already exist to facilitate the sharing of intelligence relating to confirmed, adverse data. The ability to utilise previously unseen indicators enables companies to highlight future and emerging threats. Increased competition within the insurance market has reduced customer retention rates, meaning that understanding behaviour across the industry as a whole is even more important. This should not be limited to the insurance sector as fraud is fluid and will migrate across different products, services and sectors. For example, in order to fund a fraudulent policy, an individual

The Features

‘An increasing proportion of quotations and applications are submitted online, making it easier for fraudsters to hide behind their devices’ could obtain a bank account by fraudulent means. Understanding when this has occurred is important. Embrace the new world Cutting edge technology such as vehicle telematics devices also play a key role as they capture behavioural data relating to driving habits, which are then assessed in line with an insurers risk appetite. In addition the intelligence can be leveraged to understand the true events both during and prior to a claim. For example, it can highlight instances where drivers are continually circling a location prior to an accident, which could indicate that it was staged or induced. Another area of emerging technology is the use of biometrics. Personal information relating to an individual can be stolen and used by fraudsters to impersonate them. Therefore the use of biometric checks such as facial recognition and finger print verification can be invaluable. Furthermore, voice print analysis can be utilised when making contact with claimants to establish stress levels and provide a strong indication as to whether the person is telling the truth. Additionally, the use of on-demand and live streaming can also be used to deliver important information in real time, for use within an investigation. Unstructured data sources play a big part in fraud prevention. Previously, accessing this information was a manual task but automated solutions now make the interrogation process much more efficient. Documents such as witness statements and accident reports are uploaded seamlessly, and text mining and data extraction tools are deployed to pull out the important information, which can then be used along with existing structured data. Further to this, online information such as blogs and social media are leveraged to find indicators of adverse behaviour. For example, understanding an individual’s social network connections can uncover links to known fraudsters and posts can highlight behaviours

in the moments leading up to events, which may help to establish the full picture. Furthermore, online forums are used to share methods in which fraud can be perpetrated, so identification of the relevant posts and visibility of who has viewed them will help to establish risk levels. Uncover hidden treasures An increasing proportion of quotations and applications are submitted online, making it easier for fraudsters to hide behind their devices. Understanding these devices has therefore become critical when evaluating fraud risk. Automated technology enables an organisation to capture the device ‘footprint’ as it is accesses their website. This is hugely powerful, particularly in scenarios such as Ghost Broking, whereby the same device will be used to make multiple submissions which on the surface are seemingly unrelated. Once a device is identified, it is then tracked and additional intelligence, including its prior usage, along with other risk factors (such as the use of proxies) are used to ascertain whether any suspicious activity is occurring. Take it to the next level (and beyond) Once the array of data is captured, automated solutions can be utilised to establish risk levels and identify adverse behaviour. At a simplistic level, all the information should be cleansed and standardised using automated loading routines. Once completed, sophisticated data matching techniques are deployed to identify links to previous adverse activity, which is then fed in to decision engines and acts as triggers within online referral strategies. To keep pace with the evolving nature of financial crime, an effective counter fraud strategy needs to adopt a multi-layered approach and the use of Network Analytics plays a role in achieving this. While oneto-one matching can be powerful in identifying individual cases of both first and third party fraud, the ability to leverage tools (which can establish wider connections and map out

overarching networks) is vital in the prevention of organised fraud activity. The strongest referral strategy will not simply rely on data matching alone and the use of Predictive Analytics should be deployed to highlight unexpected behaviours and to tackle future trends. All data is aggregated, and behavioural analysis is conducted to formulate predictive scoring models and profiles to cater for all fraud modus operandi. For the best results, models are also deployed to highlight the propensity to claim, removing high-risk policies and reducing losses. Once deployed in an automated environment the models help to provide a fully informed risk assessment, leading to better decision making and ensuring that high quality referrals are generated for investigators. When deployed in conjunction with online algorithms, autonomous, self-learning solutions are utilised to ensure that the decision engines and referral strategies are always optimal, with minimal need for human intervention. Innovate and educate It is worth noting that technology cannot simply tackle the problem on its own, and it is also critical that organisational working practices are augmented and that all teams involved in fraud prevention take a collaborative approach. Organisations must continue to invest in the education of internal staff as well as improving awareness amongst current and potential customers in order to ensure that they are aware of the threat and consequences of financial crime, and how the risk of it occurring can be reduced. Technology will continue to evolve and the number of data sources will increase, and financial crime prevention strategies must continue to be proactive and endeavour to stay one-step ahead of the emerging threats. The optimisation of data within innovative, consolidated solutions is vital to ensure that exposure to adverse activity and subsequent losses are minimised, while good customer experience is not impeded. Matt Stanton is SIRA Product Manager at Synectics Solutions Ltd.

MC // Fraud Supplement 2015

The Features

An Expert Witness View Low Velocity Impact It appears to be a term which has come about to suggest that an impact velocity between vehicles was insufficient to have caused personal injury to the occupants, albeit that liability is admitted. On what basis then is such a statement made? Is it that the injured party maybe fraudulently claiming for his own financial gain or is it to persuade the non-fault party to accept a lower settlement figure? Nik Ellis reports.

o how do you protect your client? How do you protect Access to Justice? How do you refute an allegation of fraudulently claiming for injuries? Step in an expert witness. An expert can be anyone with knowledge or experience of a particular field or discipline beyond that expected of a layman. An expert witness is an expert who makes this knowledge and experience available to a Court to help it understand the issues of a case and thereby reach a sound and just decision. It should be noted that a motor engineer is not a medical expert and issues dealing with injuries sustained would be well outside their area of expertise. Many whiplash type injuries are thought to occur when the head is subjected to the rapid acceleration caused by the abnormal forces acting upon the vehicle due to a collision. As an engineer, there are four main collisions we must consider when examining Low Velocity Impact and the potential to move the vehicle occupants: 1.

Head-on collisions whilst they do occur at low speeds, will more than often be the result of crossing the centre line of a road when overtaking and generally at higher speeds. In any collision however the occupant will move to the point of impact and, dependent on the severity, be thrown back in the opposite direction, research has also shown that the human neck can withstand stronger vehicle deceleration compared to that of acceleration such as in a rear end impact. In this instance, therefore a low speed frontal collision with occupants wearing seatbelts would be less likely to cause unusual occupant movement but more in line with heavy braking. 2. Sideswipe Collisions will rarely cause unusual occupant movement, especially at low speeds. The impact is generally of a longer duration and as such less likely to cause rapid acceleration or deceleration between the

MC // Fraud Supplement 2015

vehicles. Unless the impact causes loss of control to one or both of the vehicles, or a secondary external force acts upon the vehicles, they will remain in a forward motion. 3. T-bone Collisions at low speeds will have the same effect upon the target vehicle as the sideswipe, the vehicle will generally remain in a forward motion with a slight vector movement sideways, and unless acted upon by a secondary force, the movement of the occupants will remain constant. The occupants of the bullet vehicle will experience the conditions of a head on collision. 4. Rear End Shunt. The most common and perhaps most contested accident type is the rear end shunt. Quite often it is the case that the defendant representatives, having not inspected the front of their insured’s vehicle, base their conclusion upon the hearsay comments from their insured, who is often keen to play down the amount of damage. They can also be led astray by poor engineering evidence from so-called experts trying to ‘assist’. It is not uncommon to find defendants attempting to determine the impact speed of a vehicle merely by comparing the cost of repairs. The use of this comparison is flawed in many ways as vehicles can significantly differ in repair costs, particularly between the front and rear of a vehicle. An independent inspection of both vehicles is imperative to determine and consider data, such as the vehicle type, age, construction, mass and type of impact.

‘Whilst manufactures are lowering the cost of an insurer’s outlay by decreasing the cost of repairs, this may have a detrimental effect on the occupants of the vehicle and subsequently the increase in personal injury claims’ Construction of the Vehicle A vehicles bumper is designed to prevent or reduce physical damage during low speed impacts, thus reducing the financial outlay to the owner or insurer. Vehicle bumpers

The Features

‘Theoretically, if the two vehicles are of the same construction and mass, the damage sustained to them would be identical’ are not specifically designed to reduce the risk of occupant movement in a low speed collision and this often overlooked within the insurance industry. Whilst manufactures are lowering the cost of an insurer’s outlay by decreasing the cost of repairs, this may have a detrimental effect on the occupants of the vehicle and subsequently the increase in personal injury claims. Bumpers are a shield of plastic, rubber, or metal mounted to the front and rear of a vehicle and in modern day vehicles, they often use energy absorbers, specially designed brackets or foam inserts to absorb the impact of a collision. The subsections of the bumper will dissipate some of the energy from an impact and return the cover to its original shape, without leaving any visible sign of deformation. The construction of the front is designed to protect the expensive frontal components during a low speed collision, only as the speed increases will the front start to deform absorbing the increased energy levels of the impact. A low speed impact will regularly show no signs of damage to a lay person, yet to a trained eye the bumper may have dropped, a number plate exhibits fracture lines or stress marks are found to the surface of the bumper cover. We must also remember that this is just the superficial damage and the actual impact absorbing components found beneath the surface can often hide the latent and conclusive damage. The rear of a vehicle tends to have less protection than the front; generally the bumper cover will be mounted directly to the rear panel, more so in older vehicles, the modern day vehicle however will have a cross-member or reinforcement bar situated between the cover and the main structure of the vehicle. These reinforcement bars are bolted directly on to the chassis leg ends and specifically designed to crumple at higher speeds, conversely at low speeds they will remain rigid

and dissipate the energy through the vehicle whilst protecting the main structure of the vehicle. Nonetheless, the occupants will experience a proportional amount of this force. There is the misconception in the industry that no damage equals no injury, yet it has been found that bumpers will absorb impacts up to 5mph and show little or no damage. 5 mph is actually the benchmark for a bumpers ability to withstand an impact and tests have been carried out on modern day bumpers where impacts with fixed barriers at speeds in excess of 10 mph will show no signs of damage. This is an impact with a fixed barrier, elastic bumper to bumper impacts can often increase the impact speed and again show no signs of visible damage to one or both of the vehicles. The Physics The engineer should be familiar with Newton’s Laws of Motion as applied to vehicle collisions. Newton’s Second Law of Motion states that in a collision between two vehicles, there will be a transfer of momentum that will cause one of the vehicles to accelerate and the other vehicle to decelerate. As a result of the collision both vehicles will experience a change in velocity (delta-v). The transfer of momentum is bought about by force acting between the vehicles during the short period of time that they are in contact with each other. Newton’s Third Law states that for every action there is an equal and opposite reaction, for instance, the force that the bullet vehicle applies to the impacted vehicle is equal in magnitude but opposite in direction to the force that the impacted vehicle is applying to the bullet vehicle, irrespective of any difference between the size, mass or strengths of the vehicles. This does not indicate that the damage to each vehicle should appear the same because, albeit the magnitude of the force experienced by each vehicle is identical at the time of contact, the design and ability of the vehicles at the points where they come into contact will determine the degree

of surface damage and deformation that each vehicle displays. The mass of the vehicles plays a substantial part in the whole aspect of Low Velocity Impact. Total Momentum* (Before Collision) = Total Momentum (After Collision) *Momentum = Mass x Velocity The total amount of energy that enters into a system is equal to the amount released from that system. Consequently, the momentum of the bullet vehicle, plus the momentum of the target vehicle, must be the same after the collision as it was before the collision. During a rear end impact, a force will be exerted by the bullet vehicle on to the target vehicle, causing forward acceleration and crush damage to the target vehicle, the bullet vehicle will also experience an equal and opposite force causing deceleration and crush. Theoretically, if the two vehicles are of the same construction and mass, the damage sustained to them would be identical. The critical elements of this law are the velocity and mass of the bullet vehicle and how that relates proportionately to the target vehicle. A vehicle with a mass of 10,000 Kg striking a vehicle with mass of 2,000 Kg will be imposing a force five times that of two cars colliding of equal mass or weight. Therefore, a lorry colliding into the rear of a car at a low velocity can impose significant damage whilst showing little or no damage to itself and at a very low speed. As most modern day vehicles can withstand an impact over 5 mph without showing any visible signs of damage, does this mean now that the presence of visible damage will mean that the vehicle was subject to an impact speed greater than 5mph, which insurance companies consider to be the threshold for personal injury? An understanding of the basic physics and engineering principles of vehicle movement, conservation of momentum, elastic and inelastic collisions, effect of vehicle crush, delta v, and braking effect on acceleration are a must when reporting on occupant movement and low-speed collisions. Nik Ellis is Managing Director at Laird Assessors.

MC // Fraud Supplement 2015

The Features

Stick or Twist

Peter Oakes outlines the new challenges facing the insurance and claims industry when dealing with fraud.

any of us are painfully aware of the cost of insurance fraud to the industry and to honest motorists. In 2014, the ABI published its last set of statistics which indicated that a total of 118,500 bogus or exaggerated insurance claims had been detected in 2013 which were worth £1.3 billion in 2013. It was pointed out that whilst detection had increased by 30%, the value of detected dishonest claims had more than doubled since 2007. The most expensive and common form of fraud were those in the area of motor insurance at 59,900 (an increase of 34% on 2012) and with a value of £811 million (an increase of 32%)1. Our own NETFOIL intelligence contained within our Hill Dickinson Claims and Fraud Index 20132, indicated that since 2009 motor claims fraud had risen most rapidly amongst younger persons, that fraud was more prevalent in some areas than in others, although there was a gradual spread to other areas (primarily cities and their conurbations). Our records indicated that staged and contrived collisions accounted for over 45% of all motor fraud claims and our strategic data analysis also showed a significant increase in induced (slam-on) type claims. Older vehicles and in particular those aged over 10 years featured more extensively in fraud claims than in non fraud incidents. The average repeat offender rates for motor claims fraud was 13.3% (over a 3 year period between 2009-2012). Other threats that were identified were ghost brokering, credit hire fraud and fraud rings in general. Considerable challenges The ABI statistics also tell a good news story because they indicate that fraud is being detected in growing numbers. Much has been done in the industry to stem the tide: the awareness created by the ABI itself, the Government’s insurance initiative aimed at reducing the cost of insurance premiums and of

claims in general, and also the recently formed insurance fraud Taskforce, the Insurance Fraud Bureau (notably its Cheatline), the Insurance Fraud Enforcement Department (IFED), the Insurance Fraud Register (still in its early stages), the publicity surrounding the BBC’s ‘Claimed and Shamed’ series – all of which have gone some way towards bringing awareness to the public of the fact that it is the public at large which is the main victim of fraudulent insurance policies. The Courts and legislators have not been silent on the issue either. The leading case of Summers – v Fairclough Homes3 and some high profile contempt of court cases with resultant custodial sentences, have brought home to the public that the courts themselves will not tolerate fraud. The newly promulgated (Section 57) of the Criminal and Courts Act 2015 provides for the striking out of an entire personal injury claim that shows fundamental dishonesty (as also that of those who support such a claim) even where part of the claim is genuine. However, there are considerable challenges facing insurers. With the onset of the civil Justice Reforms in 2013 and also the MoJ portal, insurers are now under pressure to identify, consider and validate potentially fraudulent claims within very rigid time-frames. This has necessitated a re-evaluation of their identification and validation processes with their commensurate investigative costs as against simply paying the claim

‘Despite the regulatory obligation to investigate and fight fraud, the financial bottom line is always lurking in the background. So, it is effectively a ‘stick or twist’ situation’

MC // Fraud Supplement 2015

The Features

‘Insurers and others in the supply chain have looked to utilise intelligence tools (ever mindful of their data protection obligations) to identify, validate and pursue the right cases as quickly and efficiently as possible’ whilst it sits in the portal. The dilemma is whether to pay a bodily injury claim of say £3,000 or to risk paying £3,000 to defeat that claim. This is the conundrum that the industry faces, and despite the regulatory obligation to investigate and fight fraud, the financial bottom line is always lurking in the background. So, it is effectively a ‘stick or twist’ situation.

‘Access to... data enables the user to make an informed decision as to whether or not it is worth investigating the claim further and to do so quickly and within the confinements of time and cost’ Weeding out fraud Essentially, insurers and others in the supply chain have looked to utilise intelligence tools (ever mindful of their data protection obligations) to identify, validate and pursue the right cases as quickly and efficiently as possible. Speed and information are both critical. How quickly can this be processed and considered, and how good is the intelligence are key questions. The measure of good intelligence is the richness and quality of the data that is held. Most intelligence data sources are derived from past claims. However, is that enough? How far does the profile of a fraudster extend? Our data analysis suggests that there are confirmed links with fraud in other areas such as financial products and to identity fraud (which is the most common fraud type currently affecting the UK)4. It is therefore important that

data is sourced not just from insurance claims records. NETFOIL which is the intelligence tool provided by Hill Dickinson LLP, for example, contains over 220 million claims records relating to 10 million claims. The data it holds is also sourced from insurance policies, various enablers in the supply chain, millions of telephone numbers, open source data and more importantly, it is cross-sector incorporating claims service data from retail organisations, delivery companies, local authorities and large self-insured organisations. Within that data is a smaller set of what we regard as ‘black data’ comprising successfully proven fraudulent claims.

claim to validate such claims. This in turn enables them to be confident in deciding whether to stick or twist when faced with early decisions. Peter Oakes is Head of Fraud at Hill Dickinson. 1. ABI Statistics published 30/05/2014 2. Hill Dickinson Claims and Fraud Index December 2013 3. [2012] UKSC 26 4. CIFAS Fraudscape March 2013

Netfoil Mass Data Analysis (MDA) is the process by which we screen our clients’ open, policy and claims data (including that from casualty, property and first party claims) to identify fraudulent and/or potentially high risk claims and policies. A simple data extract routine enables claims data to be integrated (even in real time). Every claim is subject to our rules engine which provides each claim with a risk assessment resulting in greater accuracy and flexibility. The continual feeding of the intelligence cycle refines high risk identification and the claims data is continually re-analysed to identify changes in risk. An analyst can be utilised to interpret the data, weed out any potential false positives and to provide more detailed analysis. Insurers have been investing heavily in counter fraud strategy supported by fraud identification tools such as this. The important point here is that access to such data enables the user to make an informed decision as to whether or not it is worth investigating the claim further and to do so quickly and within the confinements of time and cost. It is of course just one tool. Those seeking to validate claims will be able to access this and other historical data as also identify key indicators in the

MC // Fraud Supplement 2015

Where Claims Excellence Is Compulsory

WHERE CLAIMS EXCELLENCE IS COMPULSORY Where Claims Excellence Is Compulsory What experiences are your customers really having? WhatAll experiences are your customers really having? kinds ofare insurer brands say different things. What experiences your customers really having? All kinds of brands say different Claims notinsurer always handled by the rightthings. hands. All kinds ofare insurer brands say different things. Claims are not always handled by by the 7right hands. But the fact still remains that for every 1 poor claims experience, other people are told within 24 hours. Claims are not always handled the right hands. But theBut fact still that for every 1 poor 7 otherclaims people are told within 24 hours. theremains fact still remains thatclaims for experience, every 1 poor experience,

7 other people are told within 24 hours.

The way we handle your claims is driven by leading claims psychology.

The way we handle youran claims is driven by leading psychology. Work with us and your policyholders will enjoy improved customer journey,claims whereas you will also enjoy higher fraud Work with us and your policyholders will enjoy an improved customer savings. Work with us and your policyholders will enjoy an improved customer journey, whereas you will also enjoy higher fraud

journey, whereas you will also enjoy higher fraud savings. savings. We know how to achieve both simultaneously.

We know how to achieve both simultaneously. We know how to achieve both simultaneously.

Conversation Management Services to the Insurance Industry Conversation Management Services to to the the Insurance Industry Industry Conversation Management Services Insurance www.i-cogservices.com www.i-cogservices.com www.i-cogservices.com

The Features

A new approach to tackling fraud Tara Shelton explains why understanding the psychology of those willing to commit fraud is the key to preventing fraudsters slipping through the net.

aving worked in the Insurance industry for a number of years, I have had the opportunity on many occasions to witness the implementation of methods aimed at detecting fraud. Many of those approaches however seemed to be implemented without any real thought of what the aim and objectives should be, and were more about a ‘checklist’ approach to claims validation. Many were also based on a hunch that the claim itself ‘just didn’t feel right’. We simply cannot be responding to inherited attempts to defraud Insurers in this manner. Simultaneously, fraudulent claims increase costs excessively, causing the Insurer to feel compromised. Slipping through the net... As those willing to defraud the industry on any scale spend much time researching how to be smarter and more convincing, we should be aiming to become more knowledgeable about how to spot them. A simple solution is to apply a customerfocused process, that by its own sheer nature actually identifies the deceiver for us. The older standard application method of simply processing the claim, sending out an adjuster and obtaining a statement is archaic and ineffective. The psychology of those attempting to deceive us is not affected by this process whatsoever. As a result, they easily slip through the net and the industry is none the wiser. Who wouldn’t want to spend less yet detect more fraud, correctly void more policies and be committed to our genuine population even more passionately? A smarter approach to fraud I am pleased to say that in the last 6 months I have been sensing an atmospheric change. Insurers are now realising that we need to collectively understand claims psychology and the psychology of deception to respond accordingly to presented claims. In 2013, I undertook research into the role sensory memory plays in genuine claims, when compared

‘Insurers are now realising that we need to collectively understand claims psychology and the psychology of deception to respond accordingly to presented claims’

‘As those willing to defraud the industry on any scale spend much time researching how to be smarter and more convincing, we should be aiming to become more knowledgeable about how to spot them’ to where deceit is constructed in the memory. As there is no sensory memory in existence, the falsehood is constructed only in the working memory. I have spent much time investing in smarter fraud assessment methods for the industry that actually does tap into the mind of those wishing to lie to us, as well as validating the claim itself faster and more thoroughly. At the same time, when these methods do have touch points upon the customer, it is delivered in a customer-focussed manner that provides a positive claims experience, whatever the result reached. This approach is a blend borne from my background in hostage negotiation, cognitive psychology and advanced interviewing. And it also delivers exceptional results. We apply cognitive psychology skills to identify the ‘real events’ experienced and devise natural, conversational questions that identify which memory section the customer is recalling from. We then apply sophisticated Active Listening Techniques during advanced questioning to ensure that we build a positive relationship of trust, thus reaching the correct claims result with their full understanding. All of this is supported by intelligence-led desktop research to verify and gather vital information. An ideal solution in our times of much needed innovation? The key business objective of I-COG is: ‘To use sophisticated psychology-based risk assessment techniques and intelligence research to investigate all claims referred by Insurers, provide them with accurate information to help them identify whether a claim is genuine or fraudulent and work with the claimant to ensure the right result is reached’. I-COG is now working with the identified Insurers to create a more robust claims assessment processes, using these techniques and building on the strong relationship between intelligence-led research and the application of Advanced Conversation Management. As a result, I-COG is actively pioneering a campaign to significantly reduce the number of fraudulent claims made across the industry going forward. Tara Shelton is Founder and Managing Director at I-COG Claims Management.

MC // Fraud Supplement 2015

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Case Study

Pain Syndrome – Real or Not? Whiplash Can Result in Pain Syndrome Our technical teams have dealt with thousands of whiplash cases and with most we have come to expect that there will be several weeks of severe pain, this often improves over a period of 6 – 24 months with the claimant making a full recovery. This however is not always the case and in some cases, the pain experienced following the whiplash injury is ongoing and debilitating; disrupting their day-to-day lives, affecting their relationships and interfering with their ability to work. There is no diagnosed reason for the on-going pain that these claimants experience and they can have good days, where everyday activities like shopping are possible, and bad days where they take cover in bed, report sever pain and often don’t leave their homes. As whiplash cannot be seen on an MRI scan, CT scan or X-ray the associated pain syndrome is difficult to formally diagnose. The low mood that typically accompanies this type of pain can lead to anxiety and depression, meaning treatment is also required for the psychological effects of the injury as well as the pain experienced by the physical injury. In these types of cases, a Court assesses damages based on expert evidence and in these types of cases it is essential that experts from the correct disciplines are used.

The Example

C, a 35 year old male with a wife and three young children was selfemployed within agriculture. C has a pre-existing history of depression and low mood, however, this had not interfered with his ability to work and C had maintained full employment since the age of 16, in-spite of experiencing periods of low mood. After his involvement in a road traffic accident in April 2011, C sustained a whiplash type injury to the neck and lower back with radiating pain to his legs. The four-wheel drive vehicle involved in the accident was written off as unsafe to return to the road. C received treatments via the National Health Service (NHS) and Carpenters also sourced private rehabilitation treatment including physiotherapy for his physical injuries and cognitive behavioural therapy to treat his anxiety and depression. Even after following the recommendations of treating experts C continued to suffer pain and his mood continued to lower, describing life as feeling ‘hopeless’. As part of C’s treatment he was prescribed pain medication but the strength of these began to impact C’s business. C initially tried to continue working and employed another alongside himself to carry out the manual labour involved in his line of work however, this was not economical and C was forced to close his business.

For further information, contact Carpenters Solicitors on 0844 249 3844 or visit www.carpenters-law.co.uk/

The Settlement

We obtained evidence from a specialist pain consultant and psychologist specialising in pain who confirmed that C had a psychologically based pain syndrome arising from a whiplash injury. Both agreed that C had not misreported the difficulties he had encountered as a result of his pain syndrome, including the strain on his marriage and his attempts to maintain his business. They also concurred that to C the pain was real and were of the view that with a residential pain management course at a specialist treatment centre such as The Bath or Walton Centre, C would be able to work again in light employment. The defendant insurer obtained video footage from a third party of C taking part in some of life’s normal activities like shopping and walking, what is described as a ‘good day’, and raised issues of honesty based on this video evidence. They also obtained expert evidence suggesting that C would have recovered within 6-12 months of the initial accident. The claimant solicitor was of the opinion that C had been honest and open throughout and to his credit had tried to continue working and tried both physical and cognitive behavioural therapies to treat the pain syndrome. This type of case requires full and detailed statements and strong specialist expert evidence, as they are open to heavy scrutiny by both parties in light of the Criminal Justice and Courts Act 2015 that came into force this month, empowering the court in personal injury cases; where the court is satisfied on the balance of probabilities that the claimant has been fundamentally dishonest in relation to the primary claim or a related claim, to dismiss the claim. We worked with C to ensure he not only received the appropriate compensation for his injuries but most importantly, the best care and rehabilitation for the injuries he sustained. A settlement in C’s case was reached at £65,000.

MC // Fraud Supplement 2015

carpenters