The Insurance Fraud Taskforce published its final report on 18 January 2016. The report makes far-reaching recommendations to the Government, insurers, the Association of British Insurers (ABI), the Chartered Insurance Institute (CII), Information Commissioner’s Office (ICO), Solicitors Regulation Authority (SRA) and other industry bodies.
In its conclusion, the Taskforce calls on Government to establish a “legacy vehicle” to provide oversight for the implementation of its recommendations and ensure that dialogue between different sectors on insurance fraud continues.
It is reassuring to see data and intelligence sharing at the heart of the recommendations. Access to the Claims and Underwriting Exchange (CUE) is not total across the compensator community with many Lloyd's Market, third party administrators and self-managing corporates unable to use this key dataset. Data sharing initiatives must therefore go beyond the ABI membership, the Insurance Fraud Bureau (IFB) membership and subscribers to the CUE.
Nevertheless, the recommendations, if implemented without consideration, will tread a fine line of creating undesirable consequences and behaviours which may negatively impact the best of intentions.
We summarise the key recommendations below.
Click here to view table.
Many of the recommendations aim to demystify data sharing and encourage collaboration and engagement in data sharing solutions to detect fraud. Being better equipped to fight fraud has many positive outcomes. Allowing the industry to be seen to fight fraud will remove any ‘soft touch’ perception and sends the right message of deterrence. It also demonstrates that compensators are looking after their honest customers and employees by not wasting money on disingenuous claimants.
In practice, such ideology needs to be balanced against the reality that many insurers operate on a case-by-case commercial basis where fighting fraud may not make economic sense – not least due to the foundation of fixed costs reforms that supports such an approach.
Compensators should have the option to minimise the impact of fraud and claims in the most appropriate way to any specific claim. Where a compensator is satisfied that a presented claim is genuine and wishes to deal with the claim quickly in collaboration with the claimant, the ‘system’ needs to recognise that a pre-med offer is more than a ‘spreadsheet exercise’ and can help foster trust in the sector.
It is reassuring that the Taskforce recognises the IFB as a ‘central intelligence hub’. It is unrealistic for one organisation to deliver data sharing across a varied and complex industry. Ideally, the IFB will play a crucial and leading role in bringing intelligence and data into the sector. From it must flow a network of data sharing with connected systems and databases in order to allow a true two-way data sharing process. Only then will there be effective engagement and the proliferation of information, shared thinking and innovation through shared ideas and practices.
An inevitable word of caution is however required. The prospect of further legal and regulatory change in respect of exaggerated and late claims will need careful thought. Compensators must be given the opportunity to respond to the impact of recent changes to the claims procedure and be allowed to properly assess future risks in order to prepare appropriately to meet new challenges.
Fraud will look to exist in any area where conditions present as favourable. For example, might allowing the public free access to check their records on CUE risk tailored claims presentation? Being aware and acting quickly is important to any ongoing fraud management programme. Change will result in new fraud behaviours and risks. Data analytics that monitor and examine trends will be central to our understanding of those changing behaviours and the early identification of new problem areas.