Crash for cash scandals have hit the headlines in the UK and, while the trend has reached Eastern Europe, Sam Barrett reports that counter fraud strategies are not yet able to beat the problem.
Motor insurance fraud is big news in the UK, with the latest crackdown on crash-for-cash scams resulting in a number of high profile prosecutions already this year. But, while the UK has spent many years developing a proactive approach to tackling motor insurance fraud, the battle to beat the fraudster remains in its infancy in the Balkan Peninsula.
"The UK has a mature model for tackling motor insurance fraud," says Glen Marr, director of the Insurance Fraud Bureau. "We're not done yet but we are doing a lot in terms of data sharing and working together as an industry. Insurers across Continental Europe are looking at what can be achieved but the conversations I've had would suggest some of them are now in a similar position to that of the UK 10 to 15 years ago."
Growth in fraud
Certainly motor insurance fraud is a significant problem in the Balkan Peninsula. Research by Generali PPF Holdings shows there has been general growth in insurance fraud since 2009 when the financial crisis took hold, with motor fraud the area witnessing the highest proportion of problems.
It found that the most common types of motor fraud include simulation of car accidents; fictitious invoices for repairs; and claims for higher indemnity. Further, while claims for expensive brands such as Mercedes, BMW and Audi are higher and, therefore, more visible, fraud is also commonplace across cheaper brands. For example, in Bulgaria, it identified an increasing number of cases where vehicles worth less than €3000 are reported stolen, but were either exported or given new number plates.
"Insurers across Continental Europe are looking at what can be achieved but the conversations I've had would suggest some of them are now in a similar position to that of the UK 10 to 15 years ago." Marr
Boris Peršak, head of the department for supervision, control and investigation of insurance procedures at Zavarovalnica Maribor, the second largest insurer in Slovenia, says criminals have been able to take advantage of the regulations around motor registration in the region. "The legislation is very diverse and there are many different entities that can be involved when it comes to registering a vehicle. This makes it easy to buy a damaged car in another part of Europe and then register and insure it for liability," he says. "We are aware of a large group of individuals working together across the region to defraud insurers."
As well as the existence of organised crime rings behind motor insurance fraud, there is also evidence of police collusion with the fraudsters. One of the cases investigated by Generali involved a €500 car that was involved in a collision with a Mercedes in Serbia. The police assisted the criminals by producing an official report full of ambiguities and blurred photographs. Suspicions were raised further when the Mercedes was taken abroad for repairs and a bill for €20 000 submitted.
But, while the insurers are well aware of the extent of the problem, there is little evidence of an industry-wide strategy to tackle it. As an example, talking about the state of the Bulgarian market, Kalin Dimitrov, manager of insurance publication Ins Market in Bulgaria, recognises more could be done. "Insurers aren't exchanging information. The Insurance Security Association was set up some years ago but companies aren't sending information regularly. Additionally, policies are still on paper and there's no online connection with insurance brokers. This environment makes it easier for fraudsters."
But this may be changing. In some countries in the Balkan Peninsula there is evidence of insurers beginning to get to grips with fraud. Turkey is a good example of this. Arzu Tan, a spokeswoman for Allianz Turkey, says the situation has improved since the accident report was introduced and data entered in the Traffic Insurance Information Centre (Tramer). "This has created a database of the accidents, the drivers and vehicles involved as well as details of these vehicles' previous damage. Insurance companies have used this to identify fraud," she explains.
"The Insurance Security Association was set up some years ago but companies aren't sending information regularly." Dimitrov
On top of this an insurance fraud information sharing system has also been established by the Association of Insurance and Reinsurance Companies of Turkey. This allows insurers to notify one another of any fraudulent claims. "Insurers have set up their own investigation units to tackle fraud, creating black lists that are shared across the industry," Ms Tan adds. "It's a much more professional outlook."
This approach is beginning to be seen across the Balkan Peninsula. Generali reports that many of its insurers in the region have their own fraud prevention departments and cooperation with other insurance companies is also common, both at country and international level.
Mr Peršak also believes things are improving. "Insurers are starting to work together more to share data, which is very helpful. We've seen cases where a car that is written off is used in claims that are submitted to lots of insurers," he says.
To facilitate this, his company has designed a programme that pulls together data from different insurers to enable connections to be made. "This uses data visualisation, taking each claim and using the information to build up a network with other claims. You can see the whole picture very quickly," he explains.
However, while there are clearly moves to tackle fraud, there are still considerable hurdles to overcome. Insurers in the Balkan Peninsula, and indeed those across Continental Europe, face some different challenges to their UK peers too. "Sharing data is a real challenge if you're looking to do this cross-border as you need to get your head round all the legal and cultural differences. We know that some insurers in the region are already sharing data but they'll need to address this if they really want to tackle the problem," concludes Mr Marr.
Box 1: Insurance fraud and the law
Insurance fraud is regarded as a serious crime throughout Europe and this is reflected in the maximum prison sentence that can be handed out. Among the Balkan countries, tough penalties are also in place. For example, according to figures from Generali, the maximum prison sentence for insurance fraud in Romania is 12 years. Also adopting a tough stance is Serbia, with a maximum sentence of 10 years and Bulgaria, with eight years. Croatia takes a more lenient approach, with a maximum sentence of three years.
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