The fraud defence

There are numerous books, PhDs, and countless experts that can detail the solutions for dealing with claims fraud, not least because there is no 'silver bullet' that will solve the entire problem. The general solutions that should form part of a broad strategy for addressing the problem are detailed here.

First, don't make products that attract fraudsters. Insurance products must be designed to ensure that we know our customers and deter fraudsters.

Fraudsters like policies where:

- The insured risk matches the planned fraud, such as third party cover only, or fire risk only

- Cover is short term

- Products where proof of an insured item or actual sight of the item, or through its registration, are harder to claim for. Likewise so are assets that turn up later with a clear ownership - such as known or named works of art, clearly marked or bespoke goods.The more vague and uncertain the customer identity, the insured item, and/or the policy is, the more likelihood of attracting fraudsters.

This seems obvious, but if we take on customers without looking for fraudsters, we make it easy for them to be anonymous. As an industry we still rely heavily on what they tell us, whereas banks, lawyers, accountants all now want customers to prove who they are before they will do business with them.

To avoid problems we need to:

- Ensure we know who we are dealing with and whether the customer exists.

It is too hard to check every identity document, but we are now all on many databases. It is harder to identify new immigrants, returning ex-pats, some students and fraudsters. But we should be looking for them all

- Check whether the customer has a fraudulent history. Databases such as the UK's CIFAS fraud prevention service have several hundred thousand fraudsters listed. All new policies should be checked against such databases

- If we cannot identify people or if we find potential fraudsters, then we need to make sure that we make proper enquiry as soon as is possible.

Scripted sales calls, scripted claims processes, overseas claims centres, internet-only claims processes are all such wonderful and simple ways to help a fraudulent claim through.

If calls are scripted or dealt with by people who are not expected to find fraud, it is even more important that the scripts contain clear anti-fraud messages.

By the time the claim comes in, we should have already excluded known fraudsters and deterred others. However, honest people can be driven to desperate means, and greedy people see insurers as soft targets. Catching these people is about applying a strong process, good interviewing, claim pattern analyses and controls over payments (replacing goods rather than sending cash).

It is not often cost-effective to prosecute (with or without a Fraud Bill). Police and the Crown Prosecution Service have other focuses, and court priorities are wide. Nonetheless, we still need to appear to go the full distance.

More importantly, we must avoid being frightened off by the fraudsters.

They complain to our chief executives, the Ombudsman or lawyers and we need to be assertive and fair in rebutting them professionally.

Challenges for our industry in the coming year will be:

- Implementing the Insurance Fraud Bureau without seeing it as a 'complete solution'. We must ensure we have operational fraud screening solutions linked into the industry initiative

- Develop the skills of our people to find frauds, rather than relying entirely on the latest technology tool such as voice stress analysis equipment.

So, while there are no 'silver bullets' in the toolkit, there are a lot of golden targets for us to aim at. IT

Bill Trueman is a director of fraud at Absolute Customer Management.