Callcredit Blog

The challenge of combatting insurance fraud

Fraud & Verification

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Fraud is, unfortunately, ever present and now a continual focus at every level for insurers. The Association of British Insurers (ABI) reports that fraud can add up to £50 to the annual insurance bill for every UK policyholder but this may only be a conservative estimate on the cost to consumers. A perceived “claims and compensation culture” may also contribute to continued fluctuations in premiums. This is in part evidenced by the average price of private comprehensive motor insurance increasing by 10% (according to the ABI’s latest Quarterly Average Private Comprehensive Motor Insurance Premium Tracker) against the same period last year.

There are many fraud typologies insurers face across multiple events during the lifecycle of an insurance product. From quote manipulation at the outset to the falsification/staging of claims, whether opportunistic or organised, fraud will affect an insurer’s ability to protect loss ratios and resultantly pass on better premiums to their policy holders.

The first thing I asked myself when I was asked to write this post was whether it was inadvertently a double-edged sword; how do you discuss ways to mitigate fraud in such an environment without telling a fraudster how we plan to stop them?

Fraudsters are a community, at least with respect to organised crime. Data breaches are happening within the public and private sectors, with the Dark Web providing a marketplace for hackers to sell and share their data and secrets with fraudsters who will look to utilise it against any organisation they can turn a profit from.

The insurance industry has made a clear commitment to work together and with authorities to mitigate these risks alongside challenging stigmas that fraud is a victimless crime. This year saw the celebration of the 10th anniversary of the Insurance Fraud Bureau (IFB), whose initiatives to cascade fraud intelligence across the industry have been further bolstered by a recent ABI commitment to extend a funding commitment of the Insurance Fraud Register (IFR) for another three years. The idea of syndicated data is not new – indeed multi-sector fraud data sharing has been in place for a number of years (e.g. CIFAS or National SIRA) – but what is clear is that insurers will need more than just historic data to evaluate risk.

The industry is changing, as is the way that insurers are interacting with both prospective and existing customers. Strategies will need to be put in place to market to best performing customers, provide them with the best possible customer journey and only introduce friction to mitigate risk. There is clearly a need to harness all available data to make the most informed decisions as possible.

If you would like to know more around fraud solutions please drop me an email josh.gunnell@callcreditgroup.com or if you have a specific insurance query please email darran.simons@callcreditgroup.com

Author: Josh Gunnell

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