At the start of 2015, the Government announced the creation of a new insurance fraud task force, set up to investigate the causes of fraudulent behaviour and recommend solutions to reduce the level of fraud across all lines of insurance. As Stratos Gatzouris explains, the task force published its interim report on 18 March 2015 and requested feedback from stakeholders by 13 May 2015.
The task force
The task force comprises representatives from the Association of British Insurers (ABI), the Insurance Fraud Bureau (IFB), the British Insurers Brokers Association (BIBA), the Financial Services Consumer Panel, Citizens Advice, and the Financial Ombudsman Service. It 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 task force is expected to recommend solutions which would lead to a long-term reduction in the level of insurance fraud. It will not concentrate on specific lines of insurance that have received attention previously, such as motor claims and ‘crash for cash’, but will instead consider fraud in the round. Solutions may be legislative, regulatory or industry-led.
The interim report summarises the current position in a number of areas and includes data from the ABI about the extent of insurance fraud. This data indicates that the estimated size of detected insurance fraud was £1.3 billion in 2013, while the estimated level of annual undetected insurance fraud is in the region of £2.1 billion. The ABI has also considered the impact of fraud on consumers and estimated that insurance fraud adds an extra £50 to every household’s annual insurance costs.
In compiling the interim report, the task force sought to assess the scale and impact of insurance fraud, profile different types of fraud and fraudsters, and consider current insurance industry initiatives and government reforms. The taskforce has identified four broad topics of interest which it will focus on for the remainder of the year:
- The encouragement of fraudulent claims.
- Drivers of policyholder behaviour.
- Fraud deterrents in the claims process.
- The role of fraud data.
Specific questions, which stakeholders are asked to respond to, are set out under each of these headings. In relation to data, the report indicates that the task force considers that there is capacity for fraud data to take a bigger role in preventing insurance fraud.
The report includes an initial recommendation that the ABI and BIBA update current industry guidance on preventing application fraud. They have agreed to do this by the end of 2015.
The insurance industry has for many years called for reform to the laws and claims procedures that result in insurance fraud. The Government has taken some important steps toward tackling the problem, but there needs to be a change of culture amongst consumers who perceive insurance fraud to be a victimless crime.
The report includes a number of questions that the group wishes to consider and was requesting input from stakeholders by 13 May 2015.
The task force will take feedback from stakeholders and provide a final report by the end of 2015. It will continue to publish its minutes online and will hold events with stakeholders to engage more than just the task force membership in discussions.