Why modern insurance fraud requires a new approach with Ben Fletcher, IFB

from Modern Insurance Magazine - Carpenters Group Supplement 2020

Carol Hopwood, APIL

Why modern insurance fraud requires a new approach

Ben Fletcher, Director of the Insurance Fraud Bureau, explores why greater collaboration and improved communication are vital to tackling insurance fraud.

Anyone who has worked in insurance fraud will know that two of the most commonly asked questions are: How big a problem is insurance fraud? When will it be dealt with?

Our approach to insurance fraud is interesting. I am sorry if I am the bearer of bad news, but the nature of fraud today means it is unlikely to be ever completely resolved.

When we think about the businesses we work in, and how they can deliver a great customer experience, we do not think about that as being a task that once complete, can be filed and move on to the next challenge. We

don’t ask when we will be able to perfect the experience because it is a continually evolving process that needs a lot of care and attention.

Modern insurance fraud is much the same. The nature of fraud is continually evolving, and as a result, insurers dedicate significant resources just to keep up with the latest fraud threats across the market.

Fraud, albeit in a different form, pre-dates what we recognise as insurance itself therefore the likelihood of us being able to eradicate all fraud is incredibly low, in

We have seen that the criminals are not only having a direct financial impact, because of losses through fraud, but their practices risk damaging the reputation of our industry. The reality is that fraudsters are far better at working together than we are

much the same way as society is unlikely to eliminate all types of crime. As such, we need to change people’s perceptions to recognise that insurance fraud is an issue that harms all of us in a variety of ways - it will evolve as society does and our controls to mitigate it need to respond accordingly.

The industry has made some significant steps in recent years. It was not that long ago that insurance fraud was widely perceived as a victimless crime. The mere term ‘insurance fraud’, conjured up outdated images of dodgy vehicle theft claims, paint allegedly being spilt on suspiciously old and worn carpet, and lying on applications to try and achieve a cheaper premium. Those things inevitably still happen, however what we now know is that there is a far darker side to insurance fraud. Many organised criminals now see insurance fraud as a lucrative opportunity that attracts relatively little risk and a business model that yields a healthy return on money linked to wider organised crime. Those criminals will think nothing of stealing sensitive data, inflating genuine claims for their own personal gain or creating collisions between vehicles that are not ‘accidents’ but purposeful collisions.

As impressive as the advances we have made are, the reality is that more still needs to be done and the area that probably needs the most focus is communication: how we communicate within our own industry to protect it from those who are trying to abuse it in one form or another. Also, how we communicate with our customers to make them aware of how to spot, prevent and report fraud is key. Most businesses fail because consumers no

longer want what is being offered. If we can help educate people about what fraud is and the risks associated to it, we have the opportunity to remove the criminal’s ‘would be customers’ and disrupt their own enterprise model.

Technology brings so many benefits to us right across society. The way that we as individuals are able to access and consume services has changed exponentially in the last few years, and technology needs to be embraced and encouraged. As businesses, it means we can reach customers more quickly, enable them to buy our services and form partnerships that we previously would not have thought of. We do, however, need to acknowledge that these same technologies are being used by the criminals for their own enterprise. They plan and try to future-proof their models, just as much as law abiding businesses.

Fraudsters are not restricted by the same data protection and competition law considerations as our industry is. The reality is that fraudsters are far better at working together than we are. They do not silo things like we do into product lines and try and distinguish a ’slightly,’ fraudulent claim to a ‘really’ fraudulent one, they are motivated by financial gain by whatever means.

The industry recognised the need to work together many years ago and the IFB initially started looking at organised road traffic accidents, now commonly referred to as ‘crash for cash’. Once we started aggregating the data, we started to see the links between the different groups of organisers. Fraudsters would not stick to a typical way of committing their fraud, but regularly change and innovate. We have seen that fraudsters will not be loyal to any one particular brand or product line. If they see an opportunity with any company or product they will try and exploit it. We have seen that the criminals are not only having a direct financial impact, because of losses through fraud, but their practices risk damaging the reputation of our industry. When a criminal masquerades as an insurer, broker, law firm or other, the end consumer probably doesn’t initially realise that and therefore the reputation of our industry is being put at risk just as much as the monetary risk. We have seen the criminal gangs connected to insurance fraud being connected to many other types of crime, including people trafficking, drugs, firearms and other violent offences. The criminal gangs flourish on being able to convince genuine consumers that what they are offering is legitimate, when in fact it is not. That means that the lines between the genuine and the fraud, between opportunistic fraud and organised fraud, are ever more blurred. Insurance companies are often seen as the victims because they pay the claims. However every business in the supply chain is at risk of being a victim to fraud, and ultimately we all as consumers pay for the cost of fraud in one way or another.

The IFB remains a not-for-profit organisation, operated by the industry to help deal with the issues that individual firms cannot tackle on their own. We help develop and publish best practice, share data to find the trends and patterns that fraudsters are trying to hide from us. To help co-ordinate investigations that lead to effective disruption, including ultimately people being arrested and convicted, sends a much-needed message to others that our industry is not a soft target.

What started as an organisation focused on one specific type of fraud is now looking at many different types of insurance fraud. While we began working exclusively with insurers, we now work with a range of organisations, including brokers, investigators, aggregators and law firms.

The best way to really take the fight to the fraudsters is for us to work together. The term the ‘power of the collective,’ which was used a lot in the formative years of the IFB, has never been truer than it is today.