A growing problem for insurers and consumers, today application fraud is in on the increase.
We know that a percentage of customers are lying or deliberately not disclosing certain
information and costing the industry £1.4bn annually but what’s changed?
Application fraud continues to be a very prevalent and costly issue in the insurance industry. As a result the UK government initiated an official programme of work with a dedicated taskforce in December 2014 to investigate ways to reduce the growing problem. Conclusive findings from the programme will be released at the end of 2015 with recommendations for improvement.
The Association of British Insurers (ABI) has commented on the preliminary findings of the
programme and highlighted that there’s a real opportunity for the industry to promote the value of insurance and rethink the way it communicates with its customers to discredit the myth that insurance fraud is a victimless crime.
There are also plans to standardise and centralise the sharing of data between insurers in order to tackle rising levels of fraud. The Insurance Fraud Bureau (IFB) is investigating the idea of a central industry-wide information hub and will announce the observations and proposal at the end of the year. The underlying theme and emphasis is around access to better data, market intelligence and data sharing in order to eliminate the issue and focus on prevention over cure.
This highlights the benefits of access to better data and data insight. It provides foresight and tells us what’s changing day-today in consumer behaviour. As fraud prevention solutions become available and industry initiatives that create tighter controls are introduced, insurers and brokers alike are finding out more about what customers are doing to try and lower their premiums through data manipulation. But consumers themselves are wising up and in the absence of effective technology solutions, are one step ahead in moving on to new tricks.
What’s changed and why?
Changing no claims discount data used to be a very prominent scheme. But insurers and brokers have now introduced processes widely to check this information within a few weeks of insuring the customer. Claims and conviction data manipulation used to be high up on the scam list, but consumers are wising up to the fact that this is easily checked and insurers are doing so, post-inception. Consequently consumers are trying different ploys like playing around with vehicle usage and are keen to try things they know can’t be checked that easily.
This visibility of what consumers are doing can shift the balance of power back into the insurers hands. The ability to see what consumers are doing in real-time through technology will help the industry reduce what is still costing the industry an alarming £1.4bn annually. Using such sophisticated capability will remove the ability for customers to adopt new tactics and get insurers and broker’s one step ahead.
Technology will also eliminate the significant business cost of performing large volumes of limited checks post-inception. As well as improving the experience of the vast majority of customers who are being truthful in their application for insurance. Insurers need to ensure they take on board new innovative ways to prevent fraudsters. Flexibility in doing this is also key as it’s an ever-changing picture and whatever insurers do, it will need to evolve.
This article is an extract from SSP eye issue 6
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