How do insurers detect fraud?
The vast majority of insurance claims are not subject to investigation for fraud purposes. Of those that are, most are conducted by in-house insurer counter-fraud specialists covered by FCA regulation, or chartered loss adjusters who are subject to their own professional standards. Most investigations are carried out with the knowledge of the claimant and will often involve standard checks against fraud indicators, open source data (e.g. social media) and industry databases, which the customer has usually been told about at inception of the policy and the third party claimant at the point of making the claim.
Fraud indicators and database searches may lead to a personal interview of the customer and/or claimant which can allow the interviewer to obtain comprehensive information directly from the person making the claim which, when required, is an invaluable line of enquiry. Face-to-face interviews also allow insurers to evaluate behavioural traits displayed by the interviewee. Counter fraud measures work alongside delivering good customer service – recognising that the vast majority of claimants are genuine and that legitimate claims should be paid expeditiously.
Why does the ABI collect statistics on detected fraud?
The ABI collects information annually regarding detected fraud to provide its members and wider stakeholders with an indication of the extent of fraud that the industry faces at both the application and claims stage.
This exercise does not provide any more than an indication of the level of detected fraud impacting on the insurance industry. In turn, individual insurers have their own mechanisms for understanding their own exposure to fraud and taking steps to mitigate the related risks.
Is the ABI's data a true reflection of the level of fraud that insurers, and wider society, face on a daily basis?
Insurers report to the ABI cases of clear detected fraud: that is, where there has been a conviction or caution issued or where the evidence of fraud is compelling The ABI has also developed a list of scenarios in which it is believed fraud is likely to be involved and asks its members to provide the numbers of cases which fall into those categories. While some of those cases may have an innocent explanation, many more cases of successful fraud go undetected, especially for whiplash.
The ABI’s fraud statistics are therefore intended to provide an indication of the volume and value of fraud detected by the industry. These statistics do not include claims which involve exaggerated personal injury, particularly for whiplash, where the claim has been paid. Neither do they include applications or claims that are withdrawn in the course of normal handling, for example, where there has been no combination of suspicion and subsequent challenge by the insurer.
For more information, see the ABI's explanatory note on detected fraud statistics (pdf 231 kB).