‘The tide has turned’ on fraudsters as the industry reacts to the latest ABI figures

The insurance industry has reacted positively to the latest fraud figures released by the ABI and IFB.

Earlier this morning, the ABI released its fraud figures, in which the average value of a fraudulent case topped £12,000.

However, more fraud is being detected compared to last year, with a 3% increase recorded.

The ABI’s manager of fraud and financial crime, Mark Allen called fraud “the scourge of honest customers,” while DCI Andrew Fyfe, head of IFED said some tactics used by fraudsters “puts the lives of innocent members of the public at risk”.

Positive steps

Fyfe did, however, state that he was pleased that “more fraudsters are behind bars,” but that IFED “will not be resting on its laurels.”

And that view was shared across the industry.

Ben Fletcher, director at the IFB said that while the announcement suggests the current strategy to tackle organised fraud is working, “the broader picture is more complex.” 

James Burge, fraud manager for Allianz Insurance said that from the results, it is “clear that insurance fraud remains a top priority for insurers,” but he does not want any let up and for insurers to remain dedicated and vigilant in the fight against fraud.

He said: “It’s important that we continually focus our efforts on the changing landscape of application and claims fraud, which evolves as new protective measures are put in place.”

He then called upon the courts to toughen up its sentencing, suggesting sometimes fraudsters are getting off lightly, feeding the assumption that insurance fraud is a victimless crime, which it is not.

He said: ”It’s also vital that the courts continue to raise the bar in terms of handing down the hardest judgements possible for insurance fraud.”

Clare Lunn, LV= GI’s fraud director believes “the tide has turned” for motor insurance fraudsters.

She said: “The combination of insurers’ zero tolerance to fraud, tougher regulation of Claims Management Companies (CMCs) and lawyers and a host of custodial sentences means that the ‘risk versus reward’ equation for fraudsters has changed.”

“We can go further”

Michael Kelly, head of underwriting and fraud at AXA Insurance said that while the figures are encouraging, insurers “can go further.”

“The figures on application fraud are a sign that insurers have improved their controls and are also more willing to report their findings.

“That is encouraging but we can go further, as an industry, to tackle this issue. We must make better use of the data available to us, especially large datasets. The IFB can make these available directly to insurers, enabling them to use that information in a way that is bespoke to the fraud problem.”

David Royal, manager of Aviva’s claims fraud intelligence team, said: “The scale of insurance fraud remains a major issue for honest customers, who continue to pay for fraud through their premiums.

“The ABI’s figures, as well as Aviva’s own, show a changing fraud landscape. While motor-related personal injury frauds are beginning to fall, we all know that fraud doesn’t just go away.

“For example, last year at Aviva we saw the value of detected fraudulent liability claims grow by 20%. This highlights the pressing need for all insurers to remain vigilant to new threats and continue to work together to defend our honest customers by focusing on increased prevention, detection and prosecution.”

Question the methodology

Consumer association, ACSO’s executive director, Matthew Maxwell Scott questioned the methodology behind the ABI’s findings.

While he welcomed the ABI’s focus on providing the facts of the extent insurance fraud is at in the UK, he questioned the way the data has been read.

He said: “The ABI notes that there were 371,000 ‘dishonest’ insurance applications, but how many of those had criminal intent, and how many were software detecting that customers had filled in their forms incorrectly?”

Scott said most consumers make mistakes on the filling out of the form from time to time, but that doesn’t mean those are fraudsters with criminal intent.

And he criticised the return of convictions on investment reported by the ABI.

“1,300 scams are uncovered every day but according to the ABI there are only two criminal convictions or cautions for insurance fraud per week,” he said.

“That’s a conviction rate of 0.0002%, despite the industry spending £250m a year to counter fraud. £2.4m per conviction is not a good return on investment.”

By Miles’ head of pricing, Matt Wood agreed that much more needs to be done as the return of cautions rate is not good enough.

He said: “While there are a number of high profile cases in the press, with a caution rate of just 1 in 9,000, much more work needs to be done to bring to any perpetrators to justice. That’s the only way to establish a sufficient deterrent for those thinking of participating in similar fraud scams.”

Scott said the ACSO wants the ABI to submit its finding to an independent peer review, ”to give us all confidence that the report passes the ‘Ronseal test’ and does what it says on the tin.”