Fraud Charter: Lockdown home working increases risk of insider insurance fraud

Industry leaders specialising in fraud identified the current home working recommendations, introduced by the government to mitigate the coronavirus outbreak, as a “real threat” because it increases the opportunities for insurance staff to commit fraud, or for employees to fall victim to fraudsters and enablers.

Speaking at Insurance Times’s Fraud Charter webinar this month, Mark Allen, manager, fraud and financial crime at the ABI, explained: “The home working is a threat because people are effectively a captive audience now for enablers and so on, but I think also there’s a real threat around remote working by insurance staff as well that would ordinarily be based in a claims centre.

“They face a threat of being tricked into releasing information that could be used for claims farming purposes by enablers, being induced due to by their own financial hardship.”

Furthermore, remote working could ramp up the potential for cyber-enabled data loss or data theft. Plus, Allen added, insurance staff based at home may also be tempted to commit fraud due to the fact they are not physically visible to their managers and colleagues.

He continued: “Insurers obviously do have very robust controls in place to guard against insider fraud, but I do think that increased working from home by claims staff during this pandemic does present the additional risks of cyber-enabled data loss, data theft and also fraud by staff.

“Insurers will [need to] continue to monitor activity remotely, looking at things like log on, log off times, email activity, home printing, attempts to access data for which they don’t have permissions, and of course they’ll also remind staff of the dangers of being induced to provide data to claims management companies and the consequences of fraud.

“Despite all of these controls, working remotely does mean that colleagues that would be in a call centre cannot pick up on the visual signs of unusual, suspicious behaviour as they would do in an ordinary environment.”

Mitigating insider fraud

However, Clare Lunn, director of GI fraud at LV=, said insurers have escalated and finessed existing data security measures and communications in response to the heightened risk of home working.

She told webinar attendees: “It’s around looking at our data, looking at our systems and access and that’s the bit that we have got in place. We’ve got people looking at those, so I’m not so sure that visibility is any less.

“Most insurers, because we’re aware of the heightened risk [of home working], have put even more resource and commitment into making sure our people are aware of data and data security.

I know we’ve issued lots of communications on how to keep data secure, why it’s important, etc. We’ve actually enhanced what we’re doing because we are aware of that.”

David Royal, UKGI fraud manager at Aviva, agreed with this outlook. He added that Aviva is conducting an increased number of audits to better monitor those working from home, while company reporting on fraud has switched from being monthly to weekly, helping to spot potential issues quicker.

“We’ve increased the amount of check and audit that we do on the FNOLs once people are working remotely to understand what’s coming through and the oversight in terms of just what’s happening to the numbers,” he explained.

“Lots of our reporting is monthly views of fraud performance, but we’ve gone to sharing with the business a weekly view and being much more granular than we would be before, so we can see what’s happening a lot quicker and I just think you need to use a lot of the controls you’ve already got but you’re tuning them a bit more and you’re wrapping them up a bit.”

Allianz has taken a similar approach to its reporting and now delivers daily updates rather than monthly reports, added James Burge, the company’s fraud manager.

He said: “It’s really down to how quickly as an organisation, and as an industry, that we’re changing to this.”

Although Donna Scully, director at Carpenters Group, raised the issue of whether staff can fully concentrate on fraud checks with potential distractions, such as young children, at home, the law firm’s chief legal officer Alan Hayes spoke on the benefits of home working.

“There’s not going to be a quick moving out of lockdown and actually, even if that were possible, I think a lot of organisations will change the way they work and realise that home working is actually an efficient way of doing things, improving services and providing flexibility to staff,” he said.

Sharing best practice

Another line of attack for insurers looking to combat fraud is to share best practice among their industry peers. The ABI’s Allen is a huge advocate of this.

“It’s vital that insurers put aside their competitive differences and they do share intelligence to help insurers that perhaps might have less mature fraud controls to fight fraud effectively,” he said.

This becomes increasingly important in light of the fact that fraud related to the Covid-19 pandemic may not have even hit its peak yet.

Allen continued: “Past experience has shown that fraud tends to peak later in a crisis. At first, you’ve got peoples’ general fears and anxieties perhaps about their health, in this instance; they’ll gradually be replaced by more practical, financial considerations.

“I do think it’s absolutely vital that insurers do review both their application and their claims fraud strategies, increase the frequency and the vigour of their monitoring and also be prepared to flex their model so they are fully prepared to gear up and fight fraud remotely.

“We are in the fairly early stages. We know the types of fraud will evolve as this pandemic continues and it’s important that we keep on top of it and we monitor the trends and the threats on an ongoing basis.”

Allen added that “the scale of fraud is influenced by public perceptions of insurers” – to mitigate this, he recommended that insurers raise awareness of fraud to ensure customers avoid being scammed, as well as highlight the “grave consequences” to deter potential fraudsters.

“All insurers must continue to focus on ensuring that they do provide excellent customer service and they do pay legitimate claims as expeditiously as possible,” he said.

Industry threat

Another fraud threat found within the insurance sector is ghost broking.

Allen said: “You might get ghost brokers who will attempt to use insurer branding to promote and sell fake products – it might be travel insurance, business interruption or Covid-19 protection.

“Our messaging has been very much around making consumers aware of the potential threats and what [they] can do to help protect themselves.

”The advice is: don’t feel pressured into agreeing to any offers, always check the credentials of the person you’re dealing with, never give out your personal details and always use contact details on your policy document and, above all, don’t assume that all online sites are genuine.”