Outfoxing the fraudsters

Ashdown Forest, a lovely and secluded part of the world known as the home of Winnie-the-Pooh, is hardly the place one would expect to find a crack team of insurance fraud experts.

But a 15-minute drive from East Grinstead station through the rolling, lush West Sussex countryside reveals Absolute Fraud Management.

The waiting room is deadly quiet with no receptionist and a strange painting of an ageless, genderless and expressionless face with icy blue, probing eyes. But once inside the main office, the atmosphere is buzzing, with a telephone staff of 30 or so busy grilling potential fraudsters.

A cymbal hangs in the room and whenever someone catches a fraudster, they give it an celebratory crash.

This, believes Absolute Fraud Management boss Stuart Dennis, is the best way to catch those attempting to dupe insurance companies.

“Our systems are very smart and very advanced, and are backed up by a long-term contract. If you look at some big insurers, they’ve got employees to look after their fraud. But they have their own HR restraints, whereas if we’re not performing and hitting our targets, we lose these contracts.

“As an outsourced organisation, you need to adhere to service level agreements that are quite hard. We don’t start at nine in the morning and finish at five. We’re not being paid by the clocks; we’re being paid on performance and adhering to service levels, while being FSA compliant.”

Dennis, a 39-year-old from Essex, has always had an entrepreneurial spirit. He began working right out of school and specialises in resuscitating profitless companies.

Prior to Absolute, he co-ran Blue Cube, an independent consultancy. Blue Cube acquired Absolute in May 2006 and Dennis rescued Absolute from administration. He became managing director and, in September of that year, the company was demerged from Blue Cube.

The father of three says it is not the product of a business that matters to him – it is the profit. He says: “I get bored very easily. Unless something is a major challenge, I’m not interested.”

Absolute, which has clients including Equity, Hastings, HSBC, Legal & General and KGM, has undergone sweeping changes since Dennis’s arrival. The company’s core skill set was considered solid but needed streamlining, and Dennis immediately set to work restructuring it. He focused solely on insurance, and scrapped fraud management for other areas such as human resources, credit cards and IT.

From an existing staff of 22, only seven employees decided to leave under the new regime. Now, the team has been rebuilt to 30 and Dennis says the staff are younger, smarter and more passionate, with turnover at a standstill.

In just 24 months, revenue has increased by about 450% and Absolute’s solution has been delivering a return on investment to its insurance clients of at least 475%, with a success rate of over 95%.

Dennis, who ironically considers himself a private person, admires Absolute’s ability to expose fraudsters by tapping into their psyche.

“To be able to know after a few questions that someone is lying, and then making them aware you know, plus saving an insurance company a few quid, is a lovely thing,” he says.

Insurers can send all of their claims to Absolute. Policyholders are initially referred to Absolute’s validation team, which decides whether to accept or reject a claim. If a claim is approved, it can be paid within days. If a claim is questionable, the claimant is passed to Absolute’s investigation team. The average claim takes two months to settle.

Both Absolute teams use cognitive questioning, which considers perception, memory and reasoning of an event.

“To know after a few questions that someone is lying is
a lovely thing.

Stuart Dennis, Absolute

For example, if a policyholder claims their car was stolen, the teams will test the policyholder’s memory recall by asking them to describe everything about the event in order. The claims team will record the detailed timeline using colour-coded pens so they can expose any gaps.

Use of linguistics is another tactic. During memory recall, a truthful policyholder is likely to speak in the past tense. It would be suspicious if someone used the present tense to describe an event. The teams also watch for disassociations. When a person is lying, they tend to disassociate themselves from the lie by saying, for example, ‘the car’ instead of ‘my car’. They could also generalise the incident to say for example that they know their car was locked because they always lock it, instead of saying that they know it was locked because the lights flashed.

The investigations team delve deeper, sometimes in conjunction with the police.

Absolute has also implemented a software programme called Flatline, which captures and analyses multiple layers of information on speech patterns. Fraudsters will present a ‘flat line’ on the computer screen, while a genuine claimant will demonstrate the natural peaks and troughs associated with memory recall and an authentic connection to a traumatic event.

Gabrielle Stewart, technical director of Absolute, says insurers often have inferior internal systems.

“There’s not a lot of success out there in terms of red flagging or profiling,” she says. “Profiling, such as whether the person is male or female, or red flagging when, for example, a car is stolen within a month of the policy, is not very scientific and is based on someone’s assumption.

“Even if it was accurate, it wouldn’t pick up on opportunistic fraud, where there was a genuine event.”

She adds that some insurers use lie detectors but says such devices show nervousness and are not accent-friendly.

According to Absolute, the average value for motor fraud is £4,700. But Dennis says the claims are often much higher, so he sleeps better at night knowing that the work helps keep premiums down for truthful claimants.

He adds that some insurers like to accept risky policyholders because it is a profitable business provided they have good underwriting and fraud prevention measures.

As keen as he is on productivity, Dennis believes it is important for his team to have fun. He says that being located in the forest and throwing staff barbecues helps.

“Do I really want to put the team in a tight little office where it’s all hustle and bustle all the time? The people these guys have to deal with day in and day out are stressed and that stress is pushed down the telephone. We want our staff relaxed and in a good, safe environment.”

There is no formal qualification to work at Absolute and extensive in-house training is provided. But Dennis says the employees must be naturally inquisitive. Staff backgrounds include psychology, criminology and science degrees.

Dennis says job security is strong because business is booming. He cites winning Equity as a client from Capita – the biggest outsource contract for fraud management at the time.

“Fraud is a growing trend and fraudsters are getting smarter. It’s never going to end. Especially now, with the credit crunch, people will protect their home first, and motor is a luxury. So if they’re trying to pull some cash back it’s one of the easiest places to start.”

Asked if he worries about innocent policyholder being caught in the net, he says: “They shout and holler but if we believe fraud is there, we’ll prove it. Not once has the ombudsman turned over one of our decisions.

“Sometimes we’ve got to walk away if we can’t prove it. There’s always one who walks away. But they’ll be tagged.”