ILC ARTICLE

Fighting fraud in a cost-of-living crisis

8th November 2022

In 2020 the UK insurance industry received nearly 300 fraudulent claims per day, adding up to a combined total value of £1.1bn.

But if that is alarming, the cost-of-living crisis has seen those numbers surge yet higher, with Zurich fairly representative of the industry when it reported a 25% increase in property fraud in the first five months of 2022 compared to 2021.

Combatting this rising threat was the topic a keynote session – Fighting Fraud in 2022 and Beyond ­– held during ILC’s inaugural MGA Claims Conference, which took place in late September.

Taking part were panellists Tom Helm, Director, Claims Practice Leader, Insurance Consulting and Technology at WTW; Anna Collier, Head of Fraud at Marshmallow; and Ian Carman, Director, Head of Investigation Services at Sedgwick International.

The discussion began with ILC revealing that the economic downturn topped its own poll of risk factors driving the rise in fraud, ahead of emerging technology, lack of governance within the supply chain, reduced investment in anti-fraud measures, and a lack of industry co-operation.

The panel agreed that the cost-of-living crisis was a major driver of fraud, not just in increasing incidents but also the number of people willing to commit fraud.

Anna said, “People who wouldn’t normally commit fraud are going to be pushed to the edge. They might be committing representation fraud at point of purchase to get cheaper premiums. There will also be more bent metal fraud, more defaults, and more exaggeration fraud. Internal fraud is also something we need to think about.”

Ian agreed, warning that the previous indicators are becoming less and less valid as today’s fraudsters are less and less typical and more and more like you and me.

“What concerns me most is the changing nature of fraud,” he said. “So how do we keep up?”

Technology

Anti-fraud solutions have developed significantly in recent years and investment across industry has accelerated. Tom described this new sophisticated technology as ‘the armour that can protect businesses,’ and warned that anyone who does not have systems in place to identify anomalies and interpret new data trends will be especially vulnerable during this economic downturn.

He also said that as the technologies evolve it is critical to ensure there are claims people in the room who can offer developers a nuanced understanding of how fraudsters are trying to get around these systems.

He continued, “Insurers also need to make sure there are anti-fraud measures through their supply chains. We frequently see gaps in this space, where third parties are allowed to run free without any governance. The insurer may still detect a high percentage of frauds, but are they letting too much come in the front end, and how well do they understand what fraud is coming in and how they should price for it?”

People

It seems though, that as anti-fraud technologies have improved and continue to improve, fraudsters are adapting their approach and have now identified a new weak spot in an insurer’s defence – it’s people.

Ian said, “FNOL technology is now very robust and better able to sift out fraudulent claims, so we’ve been seeing more and more calls made to claims centres in an attempt to bypass the technology. Yes, technology will play a massive role in fighting fraud, but it can’t be effective on its own. A combination of technology, people and intelligence is critical in tackling fraud, but we need to act quickly because if we don’t wake up to this new type of fraudster then we as an industry will be on the back foot.”

Anna agreed. She said that an insurer’s claims department used to be the strongest point in a company’s defence but was now a potential weak spot, and as fraud trends continue to evolve she urged the industry to look beyond its borders for further insights.

She said, “It doesn’t take long for fraudsters to find a way around whatever we put in place. They’ll often be one step ahead of us so the challenge for us is to remain just one step behind and to do that we have to look at what’s happening in other industries. That can help us predict what may be coming our way.”

Collaboration

In fact, greater knowledge sharing and collaboration is perhaps more critical than any measures a single company can take.

Ian explained how Sedgwick’s commitment to combatting fraud has been a telling factor in winning new business in recent years, suggesting that companies are actively seeking robust protective measures. However, he said that the industry is still fighting fraud on a case-by-case basis.

“We just throw fraudsters back in the pond and they pop up at another insurer,” he said.

And, with the type of fraud and the typical fraudster changing so rapidly, the need to share data has never been greater as one company alone will only ever see small part of the puzzle.

Anna said, “As long as fraudsters can make money from insurance they will continue to do so. We need to work across the entire industry to prevent it happening because if even one insurer is a victim of fraud then we all pay the cost. We need to talk more, and we need to work together.”

The ILC MGA Claims Conference held in association with MGAA was supported by gold sponsors Claims Consortium Group, Clearspeed, Davies Group, DWF360 and EDAM Group, along with silver sponsors Robertson & Co, Vitesse PSP and Wiser Academy.