When can we tap into the knowledge base?

Fraud costs the insurance industry £1.6bn a year, so it’s not surprising insurers are prepared to go to great lengths to track down the perpetrators. They’ve already taken the unprecedented step of opening their files to each other to identify fraudsters through the Insurance Fraud Bureau (IFB), so the prospect of getting access to government records of benefit cheats had them rubbing their hands with glee.

When the Serious Crime Bill was announced in January last year, it proposed setting up a legal gateway through which government bodies and private companies could share data. It was part of the government’s focus on cracking organised networks of criminals, the logic being that serial benefit cheats probably committed other types of fraud as well.

Fraud managers have welcomed the plan. “We know it goes on, but we haven’t been able to speak to the other bodies. It’s a shame we can’t rely on the police to help at the moment – they’ve got a lot of other priorities and insurers are seen as fair game,” says Neil Joslin, claims technical manager at Groupama.

“We’re getting much better at sharing data in the insurance industry, but this is going to open a whole new box of tricks.”

The idea clearly has great potential – but so far, that’s all. The IFB and industry data-sharing body, IDSL, have been in talks with the Home Office, but even though the Bill received Royal Assent last October, the government has yet to confirm what data will be shared and how.

“There’s lots of crossover in areas such as benefit fraud and insurance fraud,” says John Beadle, IFB chairman and head of fraud at RSA. “The promise is that by sharing public and private data we can radically increase our chances of detecting and preventing it. The potential is very good but the protocols of how it would work have not been defined. There’s not a whole lot of clarity. It’s frustrating.”

Under section 64 of the Serious Crime Act 2007 a public authority may disclose information for the purpose of preventing fraud to a specified “anti-fraud organisation”. The Home Office is being coy about which body it will reveal the information to, but Beadle believes that the Insurance Fraud Bureau is an obvious candidate.

“There’s an opportunity on behalf of the insurance industry for us to act as a repository for sets of data that can be shared on a reciprocal basis by government organisations,” he says.

The key word is reciprocity. The industry is understandably fearful that the government will pillage its data to catch benefits cheats. “In the past, there’s been a vacuum cleaner mentality [on the part of the government], where we would not benefit. Within the restrictions of the Data Protection Act there needs to be some degree of reciprocity, so it doesn’t become a one-way street,” says Beadle.

He is at pains to point out that the Serious Crime Act in no way usurps data protection laws or makes data-sharing obligatory; it only provides a legal gateway for the information to be shared: “It’s not going to open the flood gates to everyone sharing data with everyone else.”

But most insurers will have already obtained permission from policyholders to share their data under certain circumstances, and there’s already an exemption in section 29 of the Data Protection Act that allows police to request data in specific cases for the purposes of preventing or detecting fraud.

“Within the restrictions of the Data Protection Act there needs to be some degree of reciprocity, so it doesn’t become a one-way street.

John Beadle, IFB

So what will the new powers add?

The Home Office says only that any information could potentially be shared for the purposes of detecting fraud if it doesn’t contravene the Data Protection Act.

Experts point out that some government data – criminal records or anything held by the Department for Work and Pensions – can’t be shared under any circumstances, even with other government departments.

At present the police can request information on an individual, but wider data-sharing powers would help them, and insurers, identify networks of organised criminals. The government might never be able to confirm to insurers that someone has a criminal record, but their name might come back marked with a red flag that would serve as a warning.

“That would be very helpful,” says Joslin. “A lot of what we do is building up pictures of people and trying to find patterns.” But he isn’t sure that the IFB is the right body to take the plan forward. “It’s very good at what it does, but it’s very motor-focused at the moment and not every insurer pays into it. The ABI has got better contacts with all of its members.”

He also believes that the National Fraud Reporting Centre – which the Home Office says should be up and running by mid-2009 – would have a role in analysing data from public and private bodies to identify patterns.

The logistics of any of it are still uncertain. Beadle says that the IFB is in the early stages of planning how it might respond. “There’s not a repository of known fraud data, we’re not going to flick a switch and all sorts of things start happening. To set up a database costs money, and no insurer is going to pay unless it is sure of a return on investment.”

He won’t give a timescale, but when the IFB was set up, the feasibility studies and consultation process took several years.

Meanwhile, Fraser Fundell, chief executive of IDSL, which manages the Claims and Underwriting Exchange database, says the new law won’t necessarily require new infrastructure. “At the moment, law enforcement agencies can come to insurers and ask for information that may help prevent crime. Sharing of intelligence isn’t necessarily a big technical challenge. I don’t see why this should need a new database.”

Again, Fundell is waiting for the Home Office to release more details: “The sooner, the better,” he says.

But the Home Office so far hasn’t set out any timescale for coming back to the industry with more information. Until it does, the idea will remain a vague but tantalising possibility.