Practice Management: An opportunity to reduce insurance fraud

BY RUSSELL HUTCHINSON

In the UK the Association of British Insurers (ABI) and police forces have acted together to highlight the extent of insurance fraud and better co-ordinate their response. That co-operation includes a memorandum of understanding on the exchange of information between insurers and police as well as media events to highlight fraud as a part of a campaign against economic crimes. Here in New Zealand, the Insurance Council of New Zealand has highlighted the issue as well. In October the ICNZ ran a webinar offering insight into fraud in times of recession. ICNZ estimates fraud costs at around $680 million over the last year.

Although most fraudulent claims were for property, and the single largest category was related to motor vehicle claims, a substantial category was for personal injury. The ABI reported that 75% of fraudulent claims in the motor vehicle category contain some element of personal injury claim. The following are some examples.

• Pet shop ploy. A man was convicted after he was caught on CCTV staging "slip and trips" at a pet shop and a discount store which would have netted him £11,000.

• Caught by camera. A man was sentenced after CCTV caught him purposely banging his knee several times on a paving stone to make a fake injury claim. On spotting the camera, he started to hop on one leg to authenticate the injury. He claimed that the footage had been misinterpreted and that he was testing the paving stones to prevent injury to others.

It would be strange if New Zealanders were completely immune to the same types of incentives and pressures. Life, health and income protection claims can be the subject of fraud as well. A good local example includes the case of insurance broker Peter Taylor who was insured by Asteron Life, where the Court of Appeal backed Asteron Life’s view on statements that were made about the extent to which Taylor worked while on claim.

A significant proportion of the highlighted claims made in the UK were for personal injury. Claims can be more generous with personal injury in the UK than they are typically in New Zealand. However, for clients that hold income protection insurance, the incentives to make a fraudulent claim are similar. In a period where economic conditions have worsened for some sectors it seems likely that these incentives will rise.

The ICNZ offers a service to coordinate activities to report, identify, and reduce fraudulent claims: the Insurance Fraud Bureau. The Health Funds Association has a project called the Integrity Register to help identify fraud in health insurance claims.

The importance of this activity was perhaps made clearest by Detective Superintendent Peter Ratcliffe, Head of the City of London Police Economic Crime Funded Unit, who said:

“Insurance fraud is not a victimless crime and the effect of dishonest claims are felt by everyone. As well as bogus insurance claims inevitably increasing premiums for honest customers, certain tactics used by fraudsters, such as ‘crash for cash’, put the lives of innocent members of the public at serious risk.”

Should the FSC build on the work of the Health Funds Association now that they are to be merged and develop more capability to identify and manage insurance fraud in life and income protection insurance? The benefits of a co-ordinated approach can include:

• better information sharing – more quickly identifying insurance cheats that may move from one company to the next

• structured co-ordination with law enforcement services

• better deterrence of fraud through increased awareness. A

Russell Hutchinson is director of Chatswood Consulting and Quality Product Research, which operates Quotemonster.

Further useful reading:

https://www.abi.org.uk/news/news-articles/2020/09/detected-insurance-fraud/

https://www.abi.org.uk/globalassets/sitecore/files/documents/publications/public/2014/acpo-abi-mou-exchange-of-info.pdf

https://www.goodreturns.co.nz/article/976517358/court-of-appeal-backs-asteron-life-in-battle-with-former-broker.html

https://www.icnz.org.nz/about-us/events/icnz-speaker-series-2020/webinars/insight-into-fraud-in-times-of-recession/