Fraud Charter: Opportunistic application fraud ‘will get worse’ due to lockdown financial hardship

Industry experts are seeing an uptick in application fraud committed by opportunistic fraudsters, as some consumers look to mitigate the detrimental financial impacts of the Covid-19-related lockdown by turning to bad behaviour.

Discussed at Insurance Times’s digital Fraud Charter roundtable this month, Carina Waterhouse, anti-fraud manager at telematics provider Ticker, said that although fraud levels remained consistent at the start of the nationwide lockdown, which was implemented in March, “once the general public cottoned on the fact that this is going to happen for a long time, we’ve seen an increase in the more opportunistic fraud at point of applications”.

This could include, for example, consumers’ exaggerating their no claims discount, lowering their average mileage or saying that their car is being kept somewhere else – this action aims to reduce the individual’s risk profile, meaning their premium will be cheaper.

Waterhouse added that Ticker has also seen an influx of consumers stating their occupation as key workers, specifically NHS staff.

“I’m assuming that’s because they think we will not pursue a validation on someone who is a key worker, but when the patterns are there, we have to and they’re doing that to bypass any checks,” she said.

Emphasising this noted climb of application fraud, Waterhouse added: “It seems like any opportunity they’ve got to reduce the premium that we offer, they’re taking it now whereas we wouldn’t see that level of it before.

“We’ve got a lot more policies going into validation, we’re having to utilise our [management information (MI)] team a lot more to pick up those trends and those patterns, but it seems like the general public are now, possibly innocently and without realising, are tweaking their applications by what they probably think is nothing.”

Fraud chain

For Donna Scully, director at Carpenters Group, application fraud is a warning signal of potential claims fraud.

“If application fraud increases, or there’s new behaviours, you need to cut that off or you need to be aware of it really quickly because that’s just going to end up in claims fraud down the line,” she said.

“The stats show that if you’re willing to commit application fraud, then you’re probably likely to commit claims fraud as well.”

Waterhouse agreed: “If someone’s prepared to lie on an application, the chances are, even if they do have a claim, they will exaggerate that claim massively – you could have phantom passengers and all sorts. We’ve got to absolutely be on the ball. It’s just spotting them where it gets more difficult, which is why the MI guys are so important.”

Hardship-related motivations

Roundtable attendees collectively concurred, however, that opportunistic fraud of this nature is largely driven from the financial hardship that has emerged from the ongoing Covid-19 pandemic, and the government-mandated steps taken to control the outbreak.

Alan Hayes, legal director at Carpenters Group, explained: “That behaviour probably arises out of the economic climate as much as anything else. So, if people have been furloughed, or are worried about their jobs or there’s an economic downturn, you’re more likely to see bogus claims.”

Waterhouse added that this financial hardship motivation for fraud is a worry at Ticker, as there doesn’t appear to be an evident end-point in sight as to when financial worries linked to the coronavirus crisis will be eased.

She said: “We’re starting to feel the pinch already. We’ve had multiple customers contacting us to ask for payment holidays, for those who are paying monthly, but my concern is as time goes [on] and they continue to be furloughed or some people were made redundant before that even happened, and as they start to feel that financial pinch, what else are they going to try and do by means of making sure they’re ok financially?

“I think it will get worse. I’ve already predicted that we’ll probably see a lot of chargebacks coming through. To date, we haven’t had any, but I give it a couple of weeks and I think we’ll start to see them flowing through as a way of people clawing back money to pay the bills, keep food on the table.”

Fraud focus

For David Royal, UKGI fraud manager at Aviva, there are additional coronavirus-related fraud risks that could infiltrate the entire general insurance market. This includes, for example, employers’ liability (EL) risks surrounding those who are home working, maybe with an increase in health and safety-related claims.

Despite a reduction in claims volume for areas such as motor bodily injury claims, Royal noted that levels of fraud have remained the same or even increased. He attributed this to the fact that insurance staff may have more time to investigate potential fraud because of reduced workloads in other areas, such as claims.

“The fraud rate within those areas [is] maintaining, increasing – possibly because maybe we have a little bit more time because there’s a bit less volume coming through and we have got pretty much full capacity in terms of people to work,” he said.

“In the bodily injury and liability space, we are seeing fairly significant volume being maintained against fairly significantly reduced claim volume.”