It’s estimated that the average value of detected insurance fraud is now in excess of £12,000 which will undoubtedly have an impact on the price a genuine customer will pay for a policy. In addition, the Insurance Fraud Bureau has seen the volume of application cases under investigation increase by more than 65% since 2017.
So, with phrases such as ‘epidemic proportions’ being banded around, what is the true picture when it comes to how our industry is fighting fraud?
We’ve certainly come a long way in how we detect, capture and manage fraud, but so too have the criminals. Yes, opportunistic fraud from generally honest consumers still happens - however, in the most part, customers can be trusted. Many now understand that failure to provide accurate information could result in a policy being invalidated or a claim being denied, so realise that quote gaming and exaggerated claims are not worth the risk. But, the biggest threat to our industry continues to be from organised crime.
While the term ‘ghost broking’ has been widely used for over 10 years, we’ve never been able to eradicate this activity from the industry because when one operation is shut down, another quickly starts. The insurance fraud cycle is continuous and because we now know far more than we did 10 years ago, we never rest on our laurels.
The picture for BGL is relatively positive. Last year, we saved over one million pounds on marketing costs alone, through identifying fake policies. Also, because of the volumes we see via our multiple brands, we have been able to remove 90 per cent of fraudulent policies before they reach an insurer’s books – highlighting just how important intermediaries are in protecting insurer partners’ bottom lines which has a direct impact on the price a genuine customer will pay.
So what’s the answer?
In short, there is no silver bullet when it comes to eradicating insurance fraud. However, because of our industry’s long history of operating at the forefront of data analytics – our pricing is all based on intelligent risk modelling that many could not even begin to understand – when it comes to using this expertise to crack down on fraud, we have certainly been able to make inroads that many other sectors have not. That being said, there would certainly be significant advantage in consumer-focused businesses from all industries sharing insight and data to deliver better counter-fraud outcomes and I believe the insurance market would credibly be at the head of the table on this.
The power of data is often cited without any substance, but being able to truly unlock the potential from it is the only secret weapon we have.
Historically, a ‘sledge hammer’ approach to blocking suspicious emails at point of quote was taken by many and while this activity had its place, we’ve very much moved on. The intelligent use of bespoke algorithms allows us to be far more targeted in our point of quote counter-fraud tactics, drawing on historic trends to predict where fraud might occur.
We now address fraud through art (our skilled experts) and science (the insight). It sounds very exciting and refers to the point I made earlier about our industry having a data rich history that allows us to pioneer and test new approaches. This, coupled with the skills and creativity of our industry data scientists and fraud investigators, is key to driving success.
Tackling insurance fraud can be sectioned into three areas as a digital distributor – point of quote, point of sale and post-sale, but across these areas, developing self-educating systems that not only block but also predict has been ground-breaking. The real impact has been driven by our systems’ ability to update in real-time, meaning that as soon as a new trend is identified, intelligent machine learning means the insight is targeting and capturing potential fraudulent cases immediately – this is incredible when you consider how far our industry has come from being trapped and hindered by archaic legacy systems.
I think it’s fair to say that criminals will always find a way, but the sustained approach to combatting fraud that now exists across the insurance industry means that we are continuously discovering new ways to outsmart these operations.
I think we can all agree that there is still so much to do, especially when we consider the growing threat of identity fraud and the need for more consumer education around protecting their own data. In recent months, we’ve also seen examples of fraudsters beginning to target new insurance areas and products.
So, the answer is yes! We can certainly trust our own customers. It’s the ones that are posing as our customers who must be stopped.