Expertise-in-Action: Claims Fraud - Fully equipped

Fraud is one of the biggest problems facing the insurance industry, with  the perpetrators adding an estimated £44 to the cost of personal lines policies for honest consumers. In addition, according to findings from BDO’s Fraud Track report published in January, insurance is the second most susceptible UK industry to fraud, with £473m lost during 2012.

With brokers a key part of the distribution strategy, their role in combatting fraud at the application stage is duly noted – but is enough being done by intermediaries to tackle fraud at the claims stage?

The scale of the problem drives requirements for continuous improvement, and brokers play a vital role in early detection at both the underwriting and claims stages. The focus on application fraud has paid dividends, and maintaining the communication loop between brokers, underwriters and claims is essential.

Credit scoring at application stage and then washing data through analytical tools to identify connections between claimants, witnesses and sometimes the customer are powerful tools in the fight against fraud – there are few substitutes for investment in the emerging technology, and it assists with developing a learning partnership with brokers. It must be a continuous process – the key is early notification to all stakeholders, to enable early investigation and remedial actions to be implemented. If in doubt, it is advisable to speak to the underwriter or claims team to discuss the case.

The extra mile
However, there is always more that can be done by both insurers and brokers to combat fraud. This is a fast-moving and ever-changing environment – today’s trend will be replaced by a new threat tomorrow. The key is vigilance and communication.

The sophistication and resources of organised crime fraudsters increase daily, so investment in technology and training staff is essential if the industry is to continue to combat fraud effectively. This is a partnership for insurers and brokers to support each other with data analytics and sharing red-flag indicators – insurers must support the development of fraud capability within the broker market.

It is important for insurers to work closely with brokers of all sizes to repudiate claims. The increased focus on application fraud has meant insurers must increase their dialogue and collaboration with brokers. When networks are identified, insurers should liaise with brokers and underwriters to ensure appropriate action is taken at both the claims and underwriting stages.

Brokers are the first line of defence; training, knowledge sharing and liaising at a case-by-case level is the correct methodology for ensuring we can gather sufficient information to support repudiation. The broker’s involvement and knowledge of the customer and the market is fundamental to supporting any repudiation.


In addition, insurers must keep brokers abreast of the latest trends observed and feedback from fraud investigations to ensure a continuous development of knowledge in the market, while insurers can also assist brokers by reviewing their own fraud controls and feedback mechanisms. There are no barriers to co-operation between industry bodies and the broking community when it comes to fraud detection. Additionally, data-driven analysis performed by the Insurance Fraud Bureau can also benefit brokers.

There is a tremendous variety of capability in the broker market when it comes to fraud detection, with the vast majority of brokers having robust solutions to both application and claims fraud. However, each market presents a different challenge and drives a requirement for bespoke fraud identification skills from intermediaries.

There is potential in this area to strengthen identification rates, so this is where communication and training are of paramount importance. Where insurers see unusual claims or application patterns within a broker’s book of business, they must work with the broker to understand the root causes and determine any remedial actions required, which may be training or analytical support. This is a dynamic and fast-moving environment where partnership, co-operation, collaboration, communication, investment in skills and constant evolution with brokers is the only way to control fraud in the personal lines market.

With this in mind it is important that insurers understand the plight of all brokers – especially small intermediaries –  when it comes to investing in tools, technology and specialists. Support from underwriters can come in the form of direct training, sharing of best practice, red-flag indicators, access to a various enquiry tools and data analytics.