At the start of 2015 the Government announced the creation of an Insurance Fraud Taskforce (IFT). It aimed to investigate the causes of fraudulent behaviour and recommend solutions to reduce the level of insurance fraud across all lines. In March 2015 the IFT published its interim report. On 18 January 2016 the IFT’s final report was released. Stratos Gatzouris reviews the report’s content and provides some early thoughts on what its implications may be.
The IFT comprises representatives from the Association of British Insurers (ABI), Insurance Fraud Bureau (IFB), British Insurers Brokers Association (BIBA), Financial Services Consumer Panel, Citizens Advice and the Financial Ombudsman Service, and is chaired by David Hertzell, former law commissioner and current president of the British Insurance Law Association.
The task force was set up to look at:
- Public perception that insurance fraud is acceptable
- Existing industry practices which fail to deter fraud
- How the law can be strengthened to deter fraud
The final report makes 26 recommendations, some of which are described as ‘cross-cutting’ the industry while others focus on specific areas. Recommendations are directed at a number of different organisations and industry bodies, as well as the industry in general.
The IFT considers that improving customer understanding of insurance products will assist in reducing the level of fraud. The report recommends more targeted anti-fraud messaging and that research is carried out into what drives fraudulent behaviour.
Data quality and sharing
A key area for recommendations is around improving the quality of data held by the industry on fraudulent claims and increasing the level of appropriate data sharing. Recommendations for doing so include:
- adopting the ABI definition of fraud as standard;
- providing the public with greater access to CUE;
- increasing membership of existing anti-fraud schemes and databases;
- granting the IFB access to claims portal data and encouraging the insurance industry to support development work needed to ensure that the IFB develops into a central hub for intelligence; and
- encouraging aggregators to use fraud databases to detect fraud at application stage.
In light of the forthcoming EU data protection regulations, the IFT has also recommended that the Information Commissioner’s Office provides guidance on appropriate data sharing practices in relation to insurance fraud.
Developing best practice for insurance firms in tackling fraud
The report recommends that the ABI take a number of steps which include:
- providing a voluntary best practice guide, including a checklist of measures that insurers can take to tackle fraud; and
- producing guidance on acceptable contact between insurers and claimants where it is suspected that the claimant’s legal representatives are acting without instruction.
The industry as a whole is urged to be vigilant in monitoring emerging fraud and to engage with the government via the ABI on this. Individual insurers are urged to take ownership of counter-fraud activity at board level.
Pre-med offers are also discussed with a recommendation made that these be discouraged going forwards.
Dealing with professional enablers
The report includes recommendations to regulatory bodies to deal more firmly with what are referred to as ‘professional enablers’.
The SRA is singled out and is asked to review the standard of proof required in solicitors’ disciplinary hearings and to consider strengthening its fining powers. It is asked to make greater use of its powers to name and shame, and to work with the Claims Management Regulation Unit (CMRU) to enforce the referral fee ban and require solicitors to undertake more client identification checks in personal injury matters.
CMC regulation and nuisance calls
Another regulatory body given recommendations is the CMC regulator. The report recommends that it should be appropriately resourced to police the referral fee ban, to prevent the re-emergence of banned CMCs in other guises, consider how to deal with unregulated CMCs and to ensure that CMCs are run by fit and proper persons.
Linked to this, the Government is asked to deliver a coherent strategy for dealing with nuisance calls including appropriate statutory intervention, and the ICO is asked to work with regulators in other countries to tackle nuisance calls sourced internationally.
Dealing with late claims
Many anticipated that the IFT would recommend reducing the limitation period for whiplash claims however the report does not go so far. Rather, the Government is asked to give consideration to the possibility of:
- late claims (possibly older than six months) proceeding in the small claims track;
- a reduction in recoverable costs for late claims to, say, 50%;
- introducing predictable damages for soft tissue injuries; and
- introducing a rebuttable evidential presumption that no injury was suffered if presented after a certain period of time.
Dealing with NIHL claims
NIHL claims are targeted as an increasing source of fraudulent claims. The IFT recommended that fixed recoverable costs are introduced for these claims.
The IFT’s report has been released at the start of a year in which it looks as if there will be a number of proposals for further reform in the personal injury litigation arena. In November 2015 the chancellor, George Osborne, surprised many with announcements in his Autumn Statement that the small claims limit for (some) personal injury claims would rise, and that minor whiplash injuries would no longer be compensated in cash. The IFT has given its approval to the broad thrust of what is stated in the Autumn Statement and concludes its report with a recommendation that an IFT legacy body is set up to implement its recommendations.
Add to that the on-going review of the civil court service being conducted by Lord Justice Briggs which envisages incorporating an online court for some lower value claims, and it looks to be a busy (no doubt contentious) year for those involved in insurance and low value personal injury litigation.
The report calls for co-operation between the various stakeholders and hails the work done by the IFT working group made up of claimant and defendant representatives. While there are many details to be ironed out it is to be hoped that this co-operation will continue and that it will reap the benefits envisaged to, as the report terms it, reverse the current trend of an accident being seen as a ‘business opportunity’ rather than a ‘misfortune’.