No insurance company is immune to fraud. As good as the industry might feel prevented, fraudsters are smart and always look for the weak spot. Fraudsters use all kinds of tricks to extract money from insurers and they find ways to slip under the radar. And as these fraudsters are insurer agnostic, so no one is safe.
When the damage is translated in real figures, fraud costs insurers some billions a year globally. This results in higher premiums for the policyholders whilst the fraudsters take the benefit. The reaction from the industry is a yearly investment in fraud detection of around £200m.
Fraud is taken seriously
The good news here is that the battle against fraud is taken seriously. The insurance industry is working hard to improve on fraud detection and prevention. It is definitely a topic on the agenda and not underestimated. In this case, everything starts with awareness. A great number of initiatives have been launched, such as shared databases and committed task forces to increase the results. Police also recognizes its role so that fraudsters are not only stopped, but also caught and persecuted.
The challenge here is the coordination of the efforts. As new databases see the light, it is obvious that these will not contain all possible fraud data and case history. Also communication between fraud teams, insurance sales people, brokers and juridical organs needs to be streamlined.
As initiatives arise across all lines of business, motor insurance is most mature when it comes to tackling fraud. Looking at the amounts of money involved and the number of fraud attempts undertaken -with a new crash-for-cash claim every three hours in 2015- this seems logical. Fortunately, property, travel and pet insurance are waking up.
Sharing is caring
In order to identify fraud at an early stage it is of vital importance to share intelligence. Some companies still worry about giving out business information, as they feel this will harm their competitive advantage. However, the competitive advantage should be in the business processes rather than in their data. The advantages of sharing fraud data are obvious and will benefit all companies.
The strength lies in the massive amount of data they can bring to the table together. The more data is available, the better patterns and potential fraud can be identified. Fraudsters are not loyal to companies or products and tend to switch rather than stay at the same company. Of course this regards the professional fraudster; the occasional fraudster claiming their non-existing stolen sunglasses will stick to the same company but bring in less risk.
The proof of the pudding is in the eating. For example, in the UK a new fraud sharing platform will be launched. This Insurance Intelligence Hub will complement the Insurance Fraud Register and is seen as a key weapon in the insurance industry’s armory to fight fraud. In Malta, insurers work together closely in sharing their data, resulting in a growing number of proven fraud cases. Besides that, it is also possible to identify fraud rings before these evolve by looking at the patterns.
Given the initiatives that are deployed and the growing fraud awareness, the momentum to really start cooperating seems to be right now. Commercial reasons should not prevail over the advantages of working together. The benefits are obvious. If ideas are taken forward and put into action this will save the industry and the honest policy holder enormous amounts of money -which will otherwise vanish down the fraud-drain. Together insurance companies can set a strong example to unite and stay ahead of the fraud game. Fraud fighting is becoming part of the DNA, not only with all stakeholders within a company, but also amongst companies. And that is exactly what the future should look like.