Technology enables insurers to get closer to their customers and deliver a smoother customer journey. It also plays a prominent role in counter fraud where the industry’s strategy is increasingly digital, data-led and agile.
However, at the same time, sophisticated fraudsters are leveraging technology to tap into insurers’ customer bases. This trend has accelerated during the pandemic as online services have become increasingly essential to people’s daily lives. People are spending more time online and many are looking at ways to cut the cost of insurance or boost income through attractive investment opportunities.
These conditions have provided a perfect storm for fraudsters looking to exploit consumers’ hopes and fears – as seen in the explosion in clone investment frauds perpetrated online, in which scammers trick their victims into investing in fake products they wrongly believe to be offered by reputable brands. In 2020, Action Fraud received more than 17,000 reports of investment fraud amounting to £657.4m reported losses, an increase of 28% on the previous year. Around £78m was lost to brand cloning scams, amounting to an average, potentially life-changing, loss of over £45,000 per victim.
While there is no silver bullet for tackling online clone investment fraud, many stakeholders are working to create what the FCA has described as a “force field against unauthorised businesses marketing bogus investment activity”[1].
The insurance and long term savings industry has taken proactive measures to mitigate the scam threat, through consumer awareness campaigns, intelligence sharing and cross-industry engagement. And the FCA is ratcheting-up its proactive monitoring of the internet to aim to capture suspicious advertising within 24 hours after it first appears.
Yet existing laws have failed to keep pace with the criminals. Tech companies are currently under no obligation to identify the legitimacy of those placing adverts.
The introduction of the draft Online Safety Bill presents the government with the perfect opportunity to play catch-up. The Bill establishes a new regime to address illegal and harmful content, imposing a duty of care on tech companies to improve the safety of users online.
In the wake of strong arguments made by the financial sector, the Bill helpfully captures user-generated fraud, such as social media platforms hosting content posted by a ghost broker peddling fake motor insurance. However, recently published Action Fraud figures show that less than 10% of online investment fraud losses emanate from social media platforms. Crucially, paid-for adverts - such as those promoting clone investment frauds and ‘click to call’ claims management services – which account for most online financial scams, remain out-of-scope.
This makes no sense. The government has stated that it wishes the Bill to focus on online activities that cause “emotional or physical harm”. The ABI is only too aware of the huge psychological damage caused to individuals who are conned into giving their life savings to a criminal. Research from both Which? and the Money & Mental Health Policy Institute has demonstrated the emotional toll these scams can take. And, tragically, this can lead some people to take their own lives.
The government is gambling on the Online Advertising Programme, about which little is currently known, filling the void. Yet a consultation is not expected until at least the end of the year, following which it will be subject to a prolonged period of scrutiny before it comes to fruition. Moreover, unlike the Bill which gives Ofcom the power to impose eye-watering fines, it remains to be seen how robust any sanctions will be. In the meantime, many more consumers will be the victims of fraud.
There remains a steely resolve amongst organisations representing consumers, civil society and business to extend the Bill to capture paid for adverts. The ABI was one of seventeen organisations who recently called upon the Home Secretary to re-think the government’s approach. If the government is truly serious about meeting the Bill’s central objective of making the UK “the safest place in the world to be online”, it must listen.
[1] https://www.fca.org.uk/news/speeches/rise-scams-and-threat-legitimate-financial-services-industry