In Series: Data: Weeding out fraud

weeding

With organised fraud costing the insurance industry an estimated £392m a year, is increased use of data the key to winning the battle?

Fraud is a major issue for motor insurers, with the Insurance Fraud Bureau estimating organised fraudsters alone cost the industry £392m a year. However, while insurers have made huge advances in their fight against fraud, many believe increased use of data holds the key to winning the battle.

Data already plays a key part in the industry’s fight against fraud. “There is a raft of intelligence and tools we use to gain evidence around claims,” says Clare Lunn, head of claims crime prevention at LV. “Although each piece on its own isn’t enough to prove fraud, when combined [with other bits of data], it can help us build a case against a fraudster.”

As well as information specific to the accident itself, insurers’ claims teams use their databases to map data and identify patterns. For example, many claims investigators will plot the location of claims to identify accident hotspots and even potential fraudsters.

Jon Byford, head of underwriting, personal motor, at Axa Insurance, explains: “An organised fraud gang is likely to use the same locations again and again when it stages accidents. Plotting these can help to build up a picture and, once identified as having abnormally high numbers of accidents, will become a trigger for further investigation.”

Help from telematics
Telematics data is also beginning to become part of an insurer’s anti-fraud toolbox. This can provide information not only on the accident – for example, the speed at which the collision occurred and the vehicle’s exact location – but also details of the driver’s behaviour immediately before the event.

And telematics’ worth can extend beyond the insurance sphere. Its potential value was recently seen in a criminal case, as Neil Thomas, director of investigative services at Asset Protection Unit, explains: “Last December, a man named Daniel Paita [a 32-year-old from Kirkintilloch, East Dunbartonshire] was convicted of attempted murder as a result of data from a telematics device. It showed details of his movements that day and placed him at the scene of the crime.”

Additionally – and possibly even more controversial than the tracking capabilities of telematics – information from social media information has also come into the mix. Data such as that found on Facebook and other social networks, where the individual has consented for it to be publicly available, can be used where an insurer has a suspicion about a claim.

And, finally, data sharing has played a role in adding weight to the information insurers gather. Initiatives such as the IFB portal and the Claims and Underwriting Exchange have helped insurers identify potential fraudsters both at claims and underwriting stages, which has the result of reducing the cost to policyholders.

But technology’s usefulness does not only lie in the fraud protection sphere. As well as helping tackle fraud, it is also improving the quality of the information insurers collect. The introduction of claims apps, where policyholders can collect data such as photographs and witness information at the scene of the accident, has helped to greatly enhance the quality of claims data.

“This type of real-time data is very fresh and can help with establishing the circumstances of the accident and damage evaluation,” says Nigel Teasdale, partner and head of motor and fraud at DWF.

Embedded in the process
But while these forms of data have become embedded in the claims process, insurers and solicitors are constantly looking for new information and ways to use it to make decisions more effective.

Technology is helping provide this, as Lunn explains: “Data use is evolving fast, with new sources such as telematics and smartphones now available all the time. The industry needs to assess the value of these new data sources and find ways to interpret and use the information.”

There is certainly a lot more growth expected in the telematics arena as such products become more commonplace, and one potential growth area is onboard technology. Vehicle technology can already provide information such as the number of seatbelts in use and the speed the vehicle was travelling at when its airbags were activated, but as society moves towards the driverless car, the information collected will grow significantly. For example, cameras can be used to detect pedestrians and cyclists close to the vehicle – and this data could also provide insight into liability in the event of an accident.

Other forms of camera – notably, those mounted on dashboards – are also playing a growing part in insurers’ data feed. Although commonplace in parts of Eastern Europe, usage in the UK insurance sector is fairly limited, meaning opportunities for growth abound.

For example, LV is trialling dashboard cameras in commercial vehicles. Lunn says they have already proved successful, saying: “Vans and trucks can often be victims of induced accidents. We had one case where the footage showed the third-party had induced the accident, and we even saw how one of the vehicles that was at the scene later appeared in the claim as a hire car.”

But while the growth of data sources will deliver additional information to help insurers gain insight into the events behind a claim, there are considerable obstacles in the way.

Difficulties in access
For one, accessing the data can be difficult, especially where it may be owned by another party. As an example, although CCTV footage could help an insurer gain a better understanding of how an accident happened, obtaining this data isn’t easy. In this example, applications would need to be made to all the different companies that own the footage.

“It’s a lot easier if it relates to a serious injury and there is already police involvement to obtain the available CCTV footage but, where this isn’t the case, it isn’t always justified in terms of cost in routine claims – particularly given the short timescales insurers have to make a decision on liability,” adds Teasdale.

There are also issues around the reliability of data. For example, while a smartphone can provide real-time information, Thomas says an insurer can’t rely on it being available. “Someone can switch off their phone, turn off the location services or just leave it at home,” he explains.

Telematics also presents some potential problems. Teasdale says while it feels intuitively like telematics data will solve many of the problems around claims fraud, it is not the silver bullet it may first appear. “Insurers have always had data they could use – for instance, tacographs in lorries, [which measure speed and distance] – but they sometimes need proper analysis and experts to verify and support it,” he says.

As an example he points to whiplash claims. With so much dispute around the speed at which an injury would be sustained, telematics data could only be used in a very limited way. “If it showed the driver was 20 miles away at the time of the accident that could be used to repudiate a claim, but we haven’t yet got to a position where we could challenge a whiplash claim because the data showed the vehicle was only travelling at a few miles per hour,” he explains.

Insurers hoping to nail fraudsters on the back of some of these emerging datasets also need to be mindful of the value given to data in a legal case.
Michelle Reilly, client development manager at Weightmans, says on its own, data is not evidence. “Solicitors’ claims investigation teams have a wealth of data available to them. This is not in itself evidence, but rather a tool to identify where enquiries should be focused,” she says. “The skill of these teams is in establishing the provenance of the data and then converting it into evidence.”
The other downside with data, particularly as new sources become available, is that there may not be sufficient confidence in it for it to stand up in court. This was the case when speed cameras were first introduced, with motorists successfully challenging the technology in court.

Call for data sharing
Bringing in the analysis and expert witnesses required to validate it is expensive and, unfortunately, for an insurer dealing with a low-cost claim, these costs can significantly outweigh the benefits.

Thomas admits this can be a problem. “The more data you use to build a picture the better. If you only have one piece [of data] then this can be argued against but if, for example, you have footage from a dashboard camera coupled with telematics data, this can be like having a witness,” he says.

To improve the quality of data and help speed up the rate at which it becomes a valid tool in the fight against fraud, many are calling for more data sharing to take place across the industry. Michael Tripp, general insurance partner at Mazars, says this would greatly enhance the value of the data insurers hold.

“There is a will to share data and there are already plenty of examples of this happening, which is great, but it’s a very fragmented approach,” he says. “If a more coordinated approach was adopted, insurers would be able to use data mining techniques to identify more patterns. There’s a lot they could learn from the likes of the supermarkets and the banking sector.”

But, although there are a number of obstacles, data is set to change the way insurers understand and tackle fraud. Having more data sources and using the information more intelligently will give insurers the tools they need to weed out fraudulent claims.

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This article was published in the 13 March edition of Post magazine

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