The road to perdition

Closer collaboration with police to combat motor fraud has been welcomed by the industry, but insurers can also help in the battle by establishing a zero tolerance policy against any suspected fraud, as Edward Murray reports

Over the last couple of years, the insurance industry has taken giant strides in improving its ability to understand, recognise and punish those committing motor fraud. But it is equally true that, despite these efforts and achievements, it will never actually succeed in stopping the majority of those perpetrating the crimes in question. The very nature of organised fraud makes it difficult for insurers to get ahead and stay ahead of the game.

However, through increased collaboration, successful lobbying and a zero-tolerance attitude the industry is beginning to make some real progress. There is no doubt that the creation of the Insurance Fraud Bureau has played a major role in securing recent successes, and not just in the physical work that it undertakes. The IFB is a clear representation of the industry's intention to fight fraud and a sign that, after many years of talking around the issue, it has at last had the gumption to put a central body in place to deal with the problem.

As its website states: "The launch of the IFB in July 2006 highlights the appetite within the insurance industry to work collaboratively and with the police and law enforcement agencies to combat the fraud challenge."

Despite these efforts, there is little the IFB will ultimately achieve in terms of prosecutions and significant deterrents unless it can genuinely count on the support of law enforcement agencies. At the heart of every police force's efforts is the budget by which various projects are funded. Without funding, nothing will happen. It is as simple as that. And John Freeman, head of fraud at Capita Claims Services, comments: "Lack of home office targets for the police outside of the City of London Police restrict various police forces' ability to target funding, resources and local initiatives at combating staged accidents."

The good fight

The steps that the City of London force has taken to create a specialist fraud squad are very welcome, as is the announcement in October of last year that a significant proportion of the £28m pledged by the Attorney General to fight fraud will go to the City of London Police to help them in their efforts.

Now that money is being dedicated to such causes it is up to the insurance industry to make sure it keeps lobbying and lending its support to further initiatives and funding in the future.

Hopefully the increased number of convictions that are beginning to filter through the legal system for organised motor fraud will help in this and John Beadle, chairman of the IFB, comments: "We will continue to work closely with the police and there are a lot of trials set to take place this year following investigations we have helped in. We will be looking to publicise the convictions and sentences." Such publicity should add weight to the work being done and help gain further financial support going forward.

Mr Beadle also points to the fact that, in the last three months, an ad hoc working group has been established under sponsorship of the Ministry of Justice, as evidence that tackling motor fraud, and insurance fraud generally, enjoys more political support than ever before and real momentum is building behind the campaign to stamp it out. The group seeks to discuss ways in which fraud can be beaten other than through law enforcement and by exploring the options afforded by regulation. Mr Beadle says he is hopeful of new solutions coming to light in the coming months.

One thing that has already been seen is a sea change in the attitude of the court to motor fraud and this is particularly welcome. In the past, genuine claimants have been allowed to succeed in their claim even where they have been shown to be supporting another's fraudulent claim. However, this no longer holds true following the case of Bashir and Others v Ahmed and Others earlier in the year (Post, 21 February 2008, p3).

The genuine claimants had their case struck out in light of their role in the wider fraudulent claim being made and Lorraine Carolan, national head of fraud at Beachcroft, comments: "There has been a hardening of the attitudes by the judiciary about tainted claims and they will be thrown out."

So it seems that not only are insurers becoming better at working with each other, and the police becoming more involved in tackling motor fraud, but the courts are also taking a harder line when it comes to dealing with those brought before them. However, the question remains as to whether this is enough.

Enough is enough

Unfortunately it seems not. Despite the efforts being made by insurers to work collaboratively and an increasing amount of information being submitted to the IFB to analyse, there still remain some significant worries over what data can and cannot be used. As James Heath, partner and director of counter-fraud strategy at law firm Keoghs, says: "There is concern for data protection and the use of data. There is a firm focus on how data is used and a climate of increased caution."

Mr Heath says the systems put in place by the IFB ensure data-sharing happens appropriately but, nonetheless, he still feels there is a nervousness in the current climate. This is perhaps unlikely to hold things back for long, but certainly it is unhelpful at best.

On the other side of the fence, the truth of the matter is that insurers are always tracking fraudsters rather than lying in wait to ambush them. Fraudsters are always one step ahead and - just like the most innovative entrepreneurs - they have shown an incredible capacity to adapt and evolve.

In recent years there has been a real focus on staged, or contrived, accidents and bogus personal injury claims, which have tended to unwittingly involve ordinary motorists. These are still happening on a daily business and for some gangs offer massive profits, but those leading the field in terms of new scams and a more sophisticated modus operandi now seem to be targeting commercial vehicles and self-insured fleets.

Cath Williams, complex motor manager at Cunningham Lindsey, comments: "Self insured fraud is gathering momentum. In our opinion the larger commercial fleets are being targeted."

Ms Williams says this is for a number of reasons. In the first instance, commercial vehicles are more likely to be comprehensively insured and, certainly, it all but rules out running into an uninsured driver, which has to be the ultimate irony when it comes to staged motor accidents.

Involving a commercial vehicle also means there is less likely to be much emotional attachment from the driver involved and they are more likely to simply go through the company procedures that have been set up to deal with such an event without raising any concerns.

Loss adjusters and claims handlers are, however, now working with self-insured and commercial fleet operators in a bid to educate them of the dangers. Steven Thompson, fraud manager at adjuster Questgates, comments: "We are working closely with our self-insured clients to assist them in the fight to combat fraud - under the risk management umbrella - to ensure best practice and educate drivers in awareness, avoidance and detection."

While a lot of attention has been paid to the type of accidents being staged and the cars involved, it seems there is also a lot more that insurers could do in terms of the people involved. David Beardsworth, co-founder of insurance investigation firm The Absolute Partnership, says that on the back of extensive personal experience he believes the majority of staged accident fraud is perpetrated by those from the Asian and Eastern European communities. In turn he says this should have a significant impact on the way insurers deal with fraud.

"Most insurers use data-basing for their investigations. It is all about creating intelligence networks and some are very good. However, that does not work if a lot of people have the same name and can present their name in different ways."

For example, Mr Beardsworth says it is common for many Asian people to use their mother's maiden name, or to invert their given name and surname.

He also says that many administrative staff taking records are poorly educated when it comes to spelling and recording names from different racial groups and this weakens data-basing. As such Mr Beardsworth recommends face-to-face interviewing, but he feels too many firms are pulling away from this due to its expense.

He also questions whether insurers have been afraid to publicise figures in relation to the number of fraud cases they see involving Asian and Eastern European individuals in case they are accused of being racist. Whatever the truth of the matter, Mr Beardsworth says data-basing will only go so far when it comes to dealing with this type of criminal.

The third degree

Certainly Scott Clayton, claims fraud and investigations manager at Zurich, believes that appropriate and detailed interviewing lies at the heart of a successful campaign against fraud.

"Data-sharing is important, but good quality claims handling is also crucial." He explains that Zurich employs cognitive interviewing technique, adding: "We are trying to find the lies in a way that aligns itself to customer service."

Once the insurer gets the bit between the teeth, Mr Clayton says there is no question of evaluating whether it is economically appropriate to pursue a particular claim and comments: "We will pursue claims as far as we can; we have a zero tolerance policy."

This zero tolerance attitude is the only way to make sure fraudsters do not simply seek to lodge large volumes of low level claims that will not be picked up. Many are already trying this approach and only by following up on every case can insurers weed them out.

Ms Carolan says Beachcroft welcomes this attitude of insurers and comments: "Insurers have to take a stance to send out a message that things will not go under the radar and be left unnoticed." While it is difficult to quantify the silent savings that such efforts make, there is little doubt they are significant.

This is something that the claims department at Allianz Insurance has seen first hand and fraud manager Mihir Pandya says: "When we started pushing against one area, there was a significant change in the number and type of claims that we saw."

Looking to the future, Mr Pandya says there is little doubt that things are moving in the right direction, but he worries that too many will see the IFB as a 'silver bullet' without making the effort required to really deal with the issues they face internally.

On a wider note, he also feels the insurance industry has put a huge focus on motor fraud, but wonders whether, by taking its eye off other areas, it is not simply creating a different problem for itself. As he points out, fraud is estimated to cost insurers somewhere in the region of £1.6bn - of which only £200m is logged down against motor policies.

The insurance industry may be on the right road when it comes to its efforts against large-scale motor fraud, but there is still a long way left to travel.

Notable cases

The civil case of Bashir and Others v Ahmed and Others, brought by Fortis Insurance and defended by law firm Beachcroft, has helped set a precedent that genuine claimants will not succeed in their claims, where they are found to be supporting another's fraudulent claim.

In October six men had their claims for compensation thrown out of court, following a successful defence by law firm DWF on behalf of two of the insurance companies concerned. The men were suspected of conspiring to cause accidents in Leeds. The judge said it defied common sense that the accidents could be simple coincidences, the claimants all came from the same area, the accidents were effectively at the same place, in the same circumstances, and they all used the same accident management company.

A man was arrested last April as part of an ongoing investigation into a multi-million pound insurance fraud network based on staged motor accidents. The arrest followed a series of searches carried out by City of London Police at addresses across London. The investigation had been running since January 2007 in conjunction with the Insurance Fraud Bureau, and focused on an accident management company believed to be involved in the staged accident process.

Four people were arrested last April as part of Hertfordshire Constabulary's ongoing major investigation into 'cash for crash' fraud offences. The arrests were the second phase of a 14-month investigation, which also involved investigators from the Insurance Fraud Bureau. During phase one of the operation, nine people were arrested the previous November, including drivers, a vehicle recovery agent and an insurance vehicle examiner.

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