Roundtable: Strengthening the insurance industry’s defences against tomorrow’s fraudsters

How has the insurance fraud landscape changed over the past 12 months?

David Phillips: We’ve observed a rise in opportunistic fraud, categorised by individuals making unintentional mistakes rather than actively attempting fraud.

Specifically, we’ve noticed premium avoidance and policy manipulation instances, where some policyholders undervalue the true risk to evade proper premium payments.

There’s been a concerning trend of policyholders making poor decisions by inflating genuine claims, distorting the accurate claims values and putting additional strain on the insurance system.

These unmeritorious claims cover losses that aren’t covered elsewhere – resulting in losses for insurers and legitimate policyholders.

Peter Ward: I think it’s interesting to note that opportunistic fraud has increased by 61% in the last 12 months, according to an article published by Insurance Fraud Enforcement Department (IFED).

This is even higher than the 82% increase reported in the previous year. These statistics show that fraud is a significant problem, and it’s only getting worse.

Everyone at this table has a part to play in fighting fraud. We can share information, develop new technologies, and work together to educate the public. By working together, we can make a real difference in the fight against fraud.

Peter Ward, Aviva

Fraud is also a very under-resourced area of law enforcement. Only 1% of police resources are dedicated to combating fraud, even though it accounts for 41% of all reported crimes. This means that we need to work together to fight fraud and do more to resource law enforcement.

Everyone at this table has a part to play in fighting fraud. We can share information, develop new technologies, and work together to educate the public. By working together, we can make a real difference in the fight against fraud.

Iain Jones: We’ve noticed individuals testing new set-ups and methods to circumvent recent reforms, particularly in personal lines. The industry’s digital transformation, accompanied by expedited claims processing through straight-through methods, offers opportunities to prevent and perpetrate fraud.

As the industry prioritises customer focus, there’s optimism in catching and stopping fraud at levels comparable to before, ensuring a robust defence against fraudulent activities.

But are companies involved in straight-through processes and automation?

Charlotte Gray: To ensure the success of straight-through processing, correctly assessing the business risk we take on is crucial. We anticipate changes in the market, such as short-term leases and shifts in consumer preferences, which may lead to coverage issues.

Validating the risks and entities we engage with, including collaborating with the private sector, is vital in combating fraud. Fraudsters don’t discriminate, so understanding the people involved and their behaviours is essential for tackling moral hazards effectively.

David Clements: Straight-through processing does limit our ability to catch fraud using traditional methods and human intuition.

Fraudsters don’t discriminate, so understanding the people involved and their behaviours is essential for tackling moral hazards effectively.

Charlotte Gray, QBE

To address this challenge, we must adopt a data and intelligence-led approach for fraud identification, aligning the competing objectives of fraud detection and fast claims processing.

Embracing technology is crucial and efficient – real-time tools can minimise customer impact and harm. While the tension between fraud teams and other operational aspects persists, a healthy balance ensures ethical practices while maximising fraud detection for customers and businesses.

Adele Sumner: I’m more optimistic about straight-through processing. It offers an excellent chance to implement new fraud technologies.

Considering the sophistication of modern fraudsters in cyber crime and technology based schemes, straight-through processing allows us to intervene at various consumer touchpoints, especially when submitting fraudulent documents.

Technology providers and claims experts are seeking our input, creating more opportunities for advancement. By striking the right balance in the customer journey and detecting fraudulent documents, devices and voices, we safeguard honest customers and avoid passing on unnecessary claims costs.

Over the years, fraud detection has constantly evolved, driven by the need to keep up with fraudsters. With straight-through processing, both sides have a unique opportunity to innovate and make a difference.

Which specific fraud typologies are on the rise?

Peter Oakes: From my perspective, gap insurance is a worrying trend, which is secondary to motor insurance. Fraud related to cash for crash scams is rising, with the same gangs adapting their methods to evade traditional detection. These gangs are involved in property fraud and other areas too, showing an overlap in their fraudulent activities.

David Phillips: It’s part of the insurance world that we live in. Customers appreciate having fraud controls in place – they value the checks we perform, such as validating the claim and checking data like the data protection act and address.

Over the past year, customers have grown awareness of the severity of insurance fraud and want to contribute to combatting it.

While customers want a smooth claims process, they also understand the importance of preventing fraud.

As an industry, we are working to leverage more data to enhance our fraud-fighting capabilities. Customers expect, and support, these measures as it safeguards their assets and ensures fairness. Striking the right balance in implementing fraud controls is an art, but it’s achievable.

David McLaughlin: Dealing mainly with commercial cases, we conduct background checks on all incoming claims. We’ve seen a rise in claims with adverse financial history in directors’ records, possibly due to a lack of checks during sales or renewals for binder or delegated cases.

This aligns with the government’s experience with the furlough scheme, where rushed implementations resulted in high fraud rates.

Customers support these measures as it safeguards their assets and ensures fairness. Striking the right balance in implementing fraud controls is an art, but it’s achievable.

David Phillips, NFU Mutual

We must be cautious, as the same individuals insuring businesses were part of fraudulent claims. A retrospective analysis of the furlough scheme revealed non-trading applicants, raising doubts about claim authenticity and the potential for unchecked fraudulent activity.

What are the biggest drivers of fraud regarding the technological changes you are seeing?

Charlotte Gray: The quality of shallow fakes is getting better, and the improvements are significant. While I agree that fraudsters might not be using sophisticated methods for shallow fakes, there’s a crucial need for education within our businesses and the industry.

Lack of awareness is a real issue. Shallow fakes are appearing in motor, marine and even Canada and Asia are experiencing the same. Deep-faking videos is also a concern.

We excel in motor, property and casualty, but there’s a gap in addressing shallow fakes in medical malpractice, construction and marine, where I believe it’s prevalent. The responsibility lies with us to educate others.

Our goal should be to have insurers automatically screen all digital documents upon submission.

David McLaughlin

David Clements: Deep fakes could become a concern down the line, but we still haven’t fully addressed shallow fake controls. While there are manual methods to detect them, our goal should be to have insurers automatically screen all digital documents upon submission.

This screening process should look for data manipulations, internet-sourced images and duplicates. Incorporating this screening layer will be crucial to assess risk early in the customer journey, improving our overall processes. It’s a significant risk for the industry, and will remain a hot topic in the coming years.

Stephen Adams: The industry is pushing fraudsters in two directions. Some are finding clever ways to bypass our systems, like shallow fakes. Meanwhile, a significant subset is resorting to traditional areas without robust technology, such as account takeover by phone.

We’re directing the lazy fraudsters to easy wins while the more cunning ones explore new methods, like device ID spoofing and manipulating post-sale documents.

Our industry excels in applying front-end technological controls for online purchases, but needs to catch up in offline sales or post-sale changes with many insurers.

Stephen Adams

Our industry excels in applying front-end technological controls for online purchases, but needs to catch up in offline sales or post-sale changes with many insurers. As a result, we’re also inadvertently guiding fraudsters towards those vulnerabilities.

Which societal and technological changes could reshape the fraud landscape in the future?

David Phillips: Insurance has always been innovative, continuously seeking ways to benefit customers. It would be naive to halt progress due to fraud concerns. After all, insurance's history is one of evolution and adaptation.

There are risks, as we embrace a more dynamic online presence, but technology also offers greater opportunities for detection. We’re improving in this area, sharing more data, implementing better controls and adhering to stricter regulations.

We shouldn’t shy away from technology; it is essential to our progress. Customers still appreciate traditional methods, but technology aids us in identifying risks that might have gone unnoticed a decade ago.

Ben Fletcher: Insurance is poised to become highly customisable. With evolving generations more willing to share data we can gather more comprehensive insights about individuals. When integrated with advanced technology, this data empowers us to better understand and manage risks. While there are inherent risks, proper management can unlock valuable opportunities.

Adele Sumner: While many detection methods are available, the industry needs something that improves our investigative output. As fraudsters evolve, our investigative techniques must adapt too.

As fraudsters evolve, our investigative techniques must adapt too. Whether using innovative technology, different search systems, or even changing our approach to questioning, we need solutions to match the changing landscape.

Adele Sumner

Whether using innovative technology, different search systems, or even changing our approach to questioning, we need solutions to match the changing landscape.

Currently, the evidence from investigations is often captured in free text or files, just like we did with detection. We must speed up this process in investigations as well.

Remember, we also have stakeholders to manage during investigations, not just detection. It's a new aspect we need to consider in this space.

Matt Bosner: How we measure our success is important. We often focus on detecting and proving fraud in the claims fraud area. However, disrupting enabler activity and preventing fraud in the first place is even more important.

We should celebrate these successes and shout about them from the rooftops.

Mike Bennett: Fraudsters are more agile than our IT teams and suppliers. We must double our efforts to keep up with them, but we can’t just plug one hole at a time.

We must find a comprehensive solution using data science, application programming interfaces, and other technologies. The industry needs to be quicker, and the only way to do that is to maximise using the Insurance Fraud Bureau.

The IFB can do some of the analytics for us, and we can pass our transactions through a central body. This is the only way we can keep up with the agile and clever fraudsters.

Has the industry kept up with fraudsters, or are we one step ahead?

David Phillips: Regarding fraud victims and our customers, we seem to leave them behind in the fight against fraud.

We always focus on the fraudster themselves, but we also need to improve at focusing on the victims and using their stories to drive change.

Are we getting ahead? We can if we use the right leverage and the right story. We can have better data and technology, but we also need help from the authorities. That is what will bring about real change.

When fundamental dishonesty and Section 57 were brought in, we could say, ‘This claim is a fraud – we can get rid of it’. This should happen more often, especially with crime gangs targeting our customers.

Peter Ward: Some good things are coming out at a higher level. The government’s fraud strategy is welcome, and a serious crime prevention order exists.

We need to increase the societal pressure on fraudsters and clarify that it is not a victimless crime – it has real consequences for innocent people.

Matt Bosner

What is needed is a wider awareness campaign to get these stories out to the general public. We need to remind people that insurance fraud is not a victimless crime.

David Clements: The UK insurance industry is more mature than most regarding data sharing. This gives us an advantage in combating fraud. We save millions of pounds annually by detecting and preventing fraud, but we’re unsatisfied with that.

We want to get ahead of the fraudsters and see the number of fraudulent claims decrease. We still have work to do, but we are committed to fighting insurance fraud.

Matt Bosner: We need to educate the general public about insurance fraud. We must teach people how to prevent themselves from becoming victims and what to do if they are.

We need to increase the societal pressure on fraudsters and clarify that it is not a victimless crime – it has real consequences for innocent people.

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