In Focus: New public-private partnership opens door to new counter fraud capabilities

In October 2024, the Labour government announced what it called a “major new crackdown on insurance fraud” with the launch of its new Insurance Sector Fraud Charter (ISFC). 

This new charter is a voluntary partnership between the government and both the private and public sectors, chaired by government fraud minister Lord Hanson. Signatories pledge to support the National Crime Agency in its review of professional fraud enablers, as well as tackle ghost broking, among other initiatives. 

That today’s government has recognised the importance of countering growing levels of fraud in the insurance industry is a positive – especially considering that ABI stats from September 2024 showed that, in 2023, the cost of fraud had increased 4% year-on-year to reach £1.1bn. 

The trade body’s data also noted that 230 bogus claims were detected each day last year, on average.

At the most recent Fraud Charter roundtable on 10 December 2024 – hosted by Insurance Times and sponsored by law firm Carpenters Group – counter fraud experts noted that the new ISFC, which only incidentally holds the same name as the roundtable event, was “like an open door to talk to government going forward”. 

David Phillips, claims validation technical manager at insurer NFU Mutual, explained: ”One of the things that many of us around the table [at the ISFC] said was that it gives us the opportunity to talk to government – to say ‘we’re dealing with fraud like this and what’s government going to do about it?’

”It did feel like [the] government was really listening and were quite keen to set some targets with the view of coming back [in March 2025] to talk about them.” 

Mark Allen, chief fraud and financial crime officer at the ABI, which is acting as industry lead for the ISFC, added: ”The UK fraud strategy, which was published in May 2023, is predicated very much on the government harnessing the skills, capabilities and resources of both the public and private sectors – and nowhere is that better illustrated than in the sector charters.”

Public-private partnership

Prior to the ISFC, the government had created other industry specific fraud charters to focus on retail banking, accounting, telecommunications and technology, with the insurance sector becoming its latest area of focus. 

Each charter has been designed as a public-private sector partnership and includes commitments to make each particular sector more resilient to fraud.

Lord Hanson’s four priorities as the minister responsible for fraud, which he revealed this autumn, include raising consumer awareness of fraud, data sharing, working with the technology and telecommunications sectors to disrupt online fraud and spearheading more international cooperation. 

Commenting on this, Allen added: “All of those topics resonate with the insurance sector and are reflected to a greater or lesser degree in the ISFC. 

“The government is looking to do its bit too – for example, by exploring the barriers to information sharing and the threats posed by professional enablers.”

Despite the opening of this new channel of communication with the government, however, Allen also noted that “the hard work starts now” for the insurance sector’s counter fraud response.

Elephant in the room

In terms of utilising this new channel of cooperation with government created by the ISFC, counter fraud experts attending Insurance Times’ Fraud Charter roundtable – held at The Athenaeum Hotel, London – noted that the issue of custodial sentencing was becoming problematic because it was being used so sparingly against convicted fraudsters. 

Clare Lunn, head of counter fraud at Markerstudy, said: ”In our discussions around tackling fraud, there is a bit of an elephant in the room, which is the issue of sentencing for fraudsters.

”Given that 40% of all crime is fraud, when you look at the sentences – and particularly the people that receive custodial sentences because of fraud – there is not a huge amount to tell.” 

Ben Fletcher, director of financial crime at Allianz UK, agreed that the issue of deterrence for insurance fraud needed to be reexamined by the government.

He said: ”Deterrence is really interesting because, in years gone by, we had the deterrent sentencing that we [as a sector] wanted, so our strategy was to find the big, organised fraudsters and put out the message that you will go to prison. 

“But now, in some respects, we’re victims of our own success because we’re now intervening in those frauds much sooner, meaning the scale of the operation is smaller than it could have been if we didn’t [intervene]. That means that, in reality, getting a bigger sentence is harder and the longer term question becomes ’what does [a] deterrent look like in the future?’” 

Fletcher added that data sharing – across the insurance industry and with other sectors, such as banking – was particularly important to create a new deterrent for fraudsters. 

For example, a potential actor may be put off from committing insurance fraud if a mark against their name would make it more difficult for them to access banking services. 

Encouragingly, however, Allen reported that the government was mulling over the efficacy of introducing minimum levels of sentencing for convicted fraudsters. 

He explained: ”It can be incredibly difficult to secure these sorts of commitments from government, particularly as prisons are at bursting point. But the government did talk about whether [it] might be able to do something about minimum levels of sentencing.

“The last time the sentencing guidelines were reviewed was in 2014 and, at that time, it was really promising because, for the first time, [the government] recognised not just the financial harm that fraud causes, but the physical and emotional harm as well. 

“But I agree. Recently, it has become very, very difficult to get custodial sentences, so I’m glad that it’s being looked at via a Ministry of Justice call for evidence.”