Wednesday, 12 November 2008

Insurers fight fraud by sharing information

Any fraud officer is only too familiar with the challenges of detecting and reducing fraud; whether it is online banking fraud, identity theft or anti-money laundering. However, one industry appears to be having some success in fighting fraudsters, and it puts its achievements down to good old-fashioned information sharing.

By sharing claims data, the Association of British Insurers says that in the last three years, motor insurers alone have identified 70% more fraud equating to £5 million worth of claims per week. The Insurance Fraud Bureau (IFB) was established in July 2006 and uses a central computer system containing claims data from a number of insurers across the UK. Details of insurance policies and claims records are analyzed to identify suspicious activity.

Bogus and inflated insurance claims cost the UK insurance industry more than £1.6 billion a year. Insurance fraud ranges from policyholders exaggerating claims to organized criminal gangs inducing “innocent” motorists to crash into the backs of fraudsters’ vehicles. In a number of cases criminal gangs may have submitted bogus insurance claims to a number of insurers at the same time, so by sharing claims data, the hope is that it can be more easily detected.

While the insurance industry has enjoyed some success in combating fraud, Simon Evans, a partner at Cardiff-based law firm, Dolmans, warns that "fraudulent" insurance claims are still excessive.

"We have previously dealt with a case where a lady accidentally scratched a car door in a car park and, motivated by honesty, left her details to be contacted in order to arrange a repair of the minimal damage," says Evans. "However, when the claim came through it was for thousands of pounds of repairs. The lady has been dragged through the court system as a result, but without photographic evidence taken at the time, she has had little ability to defend her case.

“On the other side of the coin, I have been told about a recent occurrence when an intermediary tried to create a personal injury case to pass on to a solicitor. The intermediary had tried to encourage the victim of a car crash to make a claim for whiplash, even though no injury was suffered."

Evans said that charges, including perjury, contempt of court and obtaining monies by deception, were being used to deal with contrived and induced accidents. He pointed to the example of a claimant that was awarded £9,200 in compensation from a local Council after claiming he broke his ankle in a pothole. Further investigation found the claimant was injured playing football. The claimant was jailed for nine months after pleading guilty to obtaining property by deception and perjury.

The courts are also discarding evidence of a claimant if it is "tainted" by fraud and Evans said witnesses who give fraudulent supporting evidence are also likely to have any claim dismissed by the courts. However, the challenge for most firms is detecting fraud in the first place, and trying to prevent it before it even gets to the courts.

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