Roundtable: Combatting exaggeration and fraud in household claims

What indicators are you seeing that point to a rise in household fraud? Do you think an increase in online purchases has contributed to it – or at least played a part?

Simon Mattless: One of the key indicators for any type of fraud is an economic downturn and that’s now coming along. People have less money, so some are turning to crime, and fraud [has become] one of those additional opportunities to try and support them.

From a digital perspective, there is a chance that we are finding more fraud because people are using those channels. Indeed insurers are building [more fraud screening] into their digital processes so that the identification becomes a lot easier.

Carla McDonald: [On how people have been working at home more since the pandemic began, asked the panellists] In the run up to Christmas, do you think there will be an increase in application fraud?

Mat Smyth: It largely depends on the when the bulk of customers go through their renewal process. From our experience, we have a heavy churn over the Christmas period. And this year there is going to be a lot more financial pressure on people; there is less money around, but it’s the first time in a long time where people will get together. And they will feel great pressure to deliver this Christmas.

There is seasonality in home insurance fraud, associated with the weather. You get a bit of surge around January and February [with] people trying to pay off their Christmas [credit card] bills which then dies down. When the sun comes out, suddenly it spikes again with losses, thefts and things happening away from home. We start to see that rise through the summer months.

Charlotte Brown: “We are also expecting the increased financial pressure post-Christmas to lead to a rise in fraud in the new year.

What has changed given the implementation of the working from home model?

David Hoskins: We have found that there are a lot more people at home for longer [periods of time], so incidents such as accidental damage claims have increased, whether [they] are genuine losses or not. [We] are seeing a lot more damage from children – broken tablets, laptops or televisions.

Around this time of year, you [also] get higher volumes of domestic theft. You are going to get genuine thefts because there’s going to be more high-value items being kept in people’s properties. One potential by-product of that is the exaggeration of claims from those submitting genuine losses.

What precautions do you put in place to combat seasonal fraud?

James Dawson: It’s easier to lie to a screen; to prepare a story and have this fantastic narrative going, but it’s very easy to just blame the aggregators and say, it’s their fault. Many insurers will chuck their standard policy on an aggregator, select the standard questions [without] honing down their gateways of when they will and won’t quote.

You can’t just blame the digital side. Insurers have to be savvier in using [aggregators] properly.

Hoskins: It’s the customer driving [seasonal fraud] behaviour. So we need to get away from a blame culture between the two sides. [Aggregators] see a wider view of the market a lot of the time and the benefit is to have them give analysis back to insurers to inform them of what they are seeing.

Motor insurance customers regularly shop around every year. But this is not always the case with home insurance, why do you think that is?

Smyth: There will be the older generation that has been mortgage-led who have stayed with the same insurer for 10, 15, 20 years. 

[We] might naturally come out of that process now. Lockdown has pushed a segment of society uncomfortable with digital interaction [to accept it] because of the need to stay in touch with loved ones.

People have become more tech savvy and consequently, seeing as they already do this for their motor insurance, they are probably going to start shopping around more [in household]. But that will boil down to insurers, their prices, and how much competition and variance there will be in price.

Insurers are moving to purchasing data and making assumptions about risk and trying to drive the customer journey to a cleaner process.

What fields can be manipulated when filling out home insurance forms, contributing to underwriting fraud?

Brown: Undisclosed financial issues. Many clients won’t admit to having CCJ’s and insolvencies, and that’s been exacerbated by the financial situation over the past couple of years where [customers] don’t think It is relevant to their home insurance policy. They don’t understand why they are being asked these questions, therefore the more you can automate, the less opportunity there is for them to lie. 

Adele Sumner: When talking about opportunistic fraud this by far remains the main area. And once they start escalating the claims, you then start to see [them turn into] serial fraudsters. They realise we have systems [they can] manipulate in terms of names, addresses and personal information that are more prevalent.

It’s about making a claim and not getting caught. This is where technology and human interaction comes into play. But I do believe we will see more [organised fraud] with other changes in the insurance market as it is still relatively easy to do so.

Smyth: Home insurance is significantly behind motor in terms of ability and the resources available to it.

There’s no equivalent to MID, or a way of determining whether a property has been insured before nor who by and for how long. Not unless they’ve had a claim, in which case, you can pick up the previous claims history and talk to the other insurer and get a view of the risk.

That’s a big gap that we have in home: The ability to analyse a risk and understand it from a historical perspective. Not only the person that’s occupied the property, but also the property itself, because there are two risks that you’re looking at in home insurance: one’s the physical risk and age of property, the other is the current condition of the property.

When talking about the cost of repairing a home, something significant like the roof or a plumbing system issue are very expensive and difficult to do. Securing materials and tradespeople to actually get it done is also very hard presently.

So, you tend to see how that financial pressure really plays a part in people getting their property done up. We don’t have a ways or means of saying; what is the pre-inception condition of a property? There’s no pre-inception survey, there’s no photographs, there’s no report or anything like that that says: ‘this property is in good condition’ or vice versa.

So how do you nip fraud temptation in the bud?

Dawson: There’s still a common view that insurers will find any means necessary to turn down your claim. When, it’s actually going the complete opposite way by trying to promote how many claims we accept whilst still doing a thorough job in investigations.

There’s still a mentality that insurers take money and you get nothing back, and it’s very hard to stop that. And it’s not the professional [fraudsters] who think that, that’s just the standard first-time claimants who have got a genuine claim. They just chuck a little bit extra on.

Brown: It’s about consumer awareness. [We need] to make people understand the consequences of submitting a fraudulent claim or lying at the application stage. We should bring the industry together to ensure we are sharing that data, that we’re putting fraudsters on the fraud registers and sharing that information with counter-fraud agencies like the IFB, regardless of what policy it is.

How can photos and imagery support the customer at any point in their claim journey?

Dawson: We have to make it as easy as possible [for the customer to claim]. The easier the customer journey gets, the harder it becomes to detect fraud unless there is a lot of technology involved. We also need to find a balance to make it easy for people to add things onto their policies and make it so that the customer doesn’t feel like it is a hassle.

Smyth: In doing this you actually make fraud prevention easier because you’re pulling data. You’re pulling GPS data and the time and location – it’s not an absolute guarantee that they own the item, but at least [they’re] saying it’s in their possession at that time. From the customer’s perspective there’s no need for a valuation, it’s nice and easy via an app which makes it feel like a simple and friendly journey.

Do you feel greater attention is now being given to household fraud?

Matless: I do think it’s building now. We’re looking at trying to put in more controls upfront to stop fraud like that coming in. And that includes tackling the enablers, people who have invested in this as they looking for other revenue streams now [that avenues such as personal injury are being addressed].

They’re realising that the amount of opportunities in that is dwindling and thinking ‘why not look at other services like home, like property, like liability, and can we make a bit more money out of that?’ I think the IFB are taking a reasonable interest in this, and they are going out to the industry to get a bit more feedback on it.

McDonald: The ABI recently said that the average household fraudulent claim was about £12,000. Is that consistent with what you see in your own books?

Dawson: The average detected ones are actually a lot lower than that, because we don’t really investigate the extra £100 chucked on the claim, so it’s all down to definition of fraud as well.

Sumner: It’s predominantly high value, low volume fraud. Household insurance is emotive, it’s private, it’s your house. It brings passion out in the customer. It also brings passion out in the insurer, because you want to help them. 

If we were to gather again here in five years’ time, do you think the conversation we’d be having would be a lot different about where we are with household claims, in terms of the data, technology, the focus that is on it? Or do you think we’d be pretty much having the same conversation?

Hoskins: It would be good to know exactly what other insurers are actually doing as well, because from our perspective, I know that we are investing a lot in intelligence-led databases, resources, etc., and that’s across the board in terms of motor, property, casualty claims.

Smyth: Internally each insurer will probably be in a better place. I am not convinced that we’re going to have that sharing of data, that openness in homes that we do around motor- I hope we do. If I could achieve anything in the next five years, it would be to get sharing data.

Mattless: In five years’ time there is going to be a shift. We will have younger people coming through that aren’t property owners, they’re renters. They’ll be getting insurance through smaller DAs, and also buying more tech and gadgets, and they’re the expensive items. When you look at phones now costing £1500 to £2000, it’s not like you’re on a £400, £500 claim and that will affect the household market. n

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