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Rising to the challenge: Responding to the pandemic fraud threat

With COVID-19 continuing to pose challenges for insurers and for customers, and the immediate focus on the scope of insurance cover and the need to support policyholders through this challenging period, it is vital that the threat posed by consumer scams and fraudsters does  not slip off the radar. 

Here, Mark Allen, our Fraud and Financial Crime Manager has blogged on how we can ensure that customers are protected, as many seek to take advantage of the current crisis and looks ahead to our Preventing tomorrow's fraud today: awareness, agility and innovation event on September 22nd, where these issues will be discussed with experts and industry representatives. 


Understanding the range of threats

Highly mobile and sophisticated unscrupulous people inevitably look to exploit the pandemic, by preying on people’s anxieties. More time at home provides scammers with a captive audience with which to offer bogus insurance and high-risk investment and pension products, through cold calling, automated texts and various social engineering techniques.

The threat spans the insurance sector. Ghost brokers might use an insurer’s branding to offer fake general insurance products – such as business interruption or travel - that falsely claim to offer Covid-19 protection. Other scammers might tap into people’s concerns about their savings and pensions being eroded by ‘guaranteeing’ high rates of return on rogue investments.  

Consumer awareness: identifying and reporting scams

The ABI’s priority has been to equip consumers with the knowledge and tools to spot and guard against scams. The golden rule is never act in haste - if a deal appears to be too good to be true, then it probably is. It’s also important that scams are reported to Action Fraud and the Insurance Fraud Bureau’s (IFB) Cheatline so that intelligence can be analysed and measures taken to disrupt scamming activity.

Aside from the threat to consumers, insurers themselves face potentially fraudulent claims, both from fraudsters seeking to exploit the pandemic directly and from policyholders who may invent or exaggerate claims to offset financial hardship.

Past experience shows that fraud often peaks later in a crisis, as general fears are gradually replaced by practical financial considerations. Research by the ABI (June 2009) found that the 2008 recession led to significant increases in the number of people who think insurance fraud is acceptable and in crude attempts to commit claims fraud for the first time.     

Insurers appreciate that people may be experiencing financial hardship and feeling the pinch. The scale of fraud is influenced by public perceptions of insurers. Insurers must ensure their customers are well-informed, both to avoid being scammed and to understand the grave consequences of committing fraud. Moreover, insurers must continue to focus on providing excellent customer service, paying legitimate claims expeditiously.

Equally, insurers are working hard to protect their genuine customers who foot the bill for fraud through higher premiums.    

Gearing-up to curtail fraud in an economic downturn

At the time of the last recession, many insurers relied heavily on manual intervention to detect fraud. There is now more reliance on predictive analytics and insights gleaned from data. Insurance staff are well trained, with more advanced counter fraud awareness and technical skills.

Insurers should ensure they are fully prepared for an increase in ‘business as usual’ frauds, as well as emerging threats specifically related to Covid-19. They should review their application and claims fraud strategies, increase the frequency and rigour of monitoring and flex their models so they are fully geared-up to fighting fraud remotely.  Collaboration is essential. It is vital that insurers share intelligence to help insurers with less mature controls to fight fraud effectively. Cross-sector detection and enforcement capability is greatly improved. The IFB is developing a Covid-19 threats service to help to inform the sector response and Insurance Fraud Enforcement Department is actively looking to disrupt organised fraudsters and enablers.   

In short, the industry is alive to the threat and will not hesitate to ensure that fraudsters seeking to profit at the misery and expense of others will suffer severe and long-lasting consequences.    

At the Preventing tomorrow's fraud today: awareness, agility and innovation event on September 22nd, we will focus on how the insurance industry must continue to build an agile, fit-for-purpose counter fraud strategy that enables it to stay ahead of increasingly sophisticated and mobile fraudsters.  

Last updated 01/06/2020