BGL's Peter Thompson on combating insurance fraud


Detecting and and deterring insurance fraud is a priority for many in the insurance industry. Peter Thompson, BGL Group’s CEO for insurance, distribution and outsourcing, looks at what’s next in the industry's fight against insurance fraud and reflects on how far the industry has come over the past 10 years.

Insurance fraud is not a victimless crime. While the majority of consumers will hopefully never come into contact with this activity, they are all unknowingly paying the price. 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 bandied around, what is the true picture when it comes to how our industry is fighting fraud?

The industry has come a long way in how it detects, captures and manages 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 more than 10 years, it has never been possible 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 far more is known than 10 years ago, the sector never rests on its laurels.

So what’s the answer?  

In short, there is no silver bullet when it comes to eradicating insurance fraud. However, because of the industry’s long history of operating at the forefront of data analytics – 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, the industry has 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 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 available.

Historically, a ‘sledgehammer’ approach to blocking suspicious emails at point of quote was taken by many and while this activity had its place, everything has very much moved on. The intelligent use of bespoke algorithms allows far more targeted point of quote counter-fraud tactics, drawing on historic trends to predict where fraud might occur.

Fraud is now addressed through art (skilled experts) and science (the insight). It sounds very exciting and refers to the point about the industry having a data rich history that allows pioneering and testing of new approaches. This, coupled with the skills and creativity of 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 the 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.

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 it is continuously discovering new ways to outsmart these operations.

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.

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