Stepping up to the fraud challenge


  • While insurers have taken steps to tackle claims fraud, they now need to stop dishonest individuals being taken on their books in the first place by identifying those who are manipulating their data pre-inception.
  • Research by SSP showed over 55% of consumers felt it was acceptable to change their personal details across multiple applications to find the best price for their policy.
  • This behaviour has resulted in a potential £1.42 billion loss of motor premiums in the broker channels and only 22% of insurers feel they are successfully dealing with pre-inception fraud.
  • Across the board, insurers have responded to application fraud by loading their prices, with every UK policyholder paying an extra £50 on their annual insurance bill. Yet by being able to identify dishonest individuals in real-time across the whole market, insurers can write the risks they wish to write at the correct premium and decline the risks that are clearly suspicious.
  • Progressive insurers are already adopting innovative solutions such as SSP Verify to monitor the behaviour of individual customers in real-time across the whole insurance market to pinpoint when application fraud is occurring.
  • In just 24 months’ time, we predict 40% of insurers will have successfully implemented counter-fraud solutions and be reaping the rewards.
  • Those insurers who do not respond now will be left with a murky pool of higher risk business. They will need to continuously load their prices to compensate for the fraudulent behaviour they are not detecting – making them less and less competitive against their progressive counterparts.
  • So the question remains — will you be riding the wave or creating it?


2016 is set to be a challenging year for insurers.With a number of pieces of regulation set to come into force, insurers will need to find a way to navigate this minefield, while continuing to operate efficiently and maintain a competitive advantage.

One way for insurers to achieve this is by taking the necessary action to tackle fraud, and application fraud in particular. A study by BDO showed that the finance and insurance industry was the most susceptible to fraud, while the ABI estimated the level of detected insurance fraud in 2014 was £1.32 billion. Meanwhile, annual undetected insurance fraud is estimated to be in the region of £2.1 billion.

Despite this, nearly two-thirds (64%) of general insurers and brokers who responded to the third annual Insurance Times fraud survey said that the industry was not innovative enough in its fight against fraud.

However, while insurers are procrastinating in their response, their customers certainly are not. As they start to shop around more to obtain lower prices, there is also the likelihood that consumers are looking for other ways to achieve savings – potentially resulting in even greater levels of fraud.


Fraud has been one of the most persistent and growing issues for the insurance industry over the last ten years. While ghost brokers and organised fraud rings make all the headlines, Experian analysis showed the majority of insurance fraud is carried out by non-professional fraudsters, with 90% of fraud in financial services committed by first-party fraudsters.

Research by SSP showed over 55% of consumers felt it was acceptable to change their personal details across multiple applications to find the best price for their policy. We saw that:

  • more than a third (35%) of converted policies have at least one potential indicator of application fraud
  • nearly a tenth (9%) have one or more very obvious and significant indicators

 The potential cost of all this data manipulation was highlighted by one particular customer who significantly changed their details during the course of 77 quote iterations – eventually halving their premium before the policy was converted by an unaware insurer.

A further example of how this can happen is shown in the diagram below:

Application manipulation example

By changing the number of NCD years, where the car is kept overnight and what it is used for, the customer managed to reduce their premium by £777 – saving 60% on the original quote. These changes could be tested over the phone, online or via broker conversations, before ending on a quote the applicant submits.

Given this example, it is perhaps hardly surprising that such behaviour has resulted in a potential £1.42 billion loss of motor insurance premiums in the broker channel.

Yet lost premium is just the tip of the iceberg. Customers who lie at the application stage are 40% more likely to make a claim, and this rises to 66% for drivers who lie on their initial application. As a result, the claims costs resulting from manipulation of data pre-inception could be as high as £1.36 billion.


SSP research and analysis of market trends shows that:

  • 27% are likely to lie about where a vehicle is usually kept overnight

  • 13% believe it is acceptable to use another address

  • 15% believe it’s okay to change the numberof NCD years

  • 57% of parents would consider fronting a policy

  • 9% of consumers would withhold claims and convictions

  • 19% are likely to lie about the current mileage of the car

  • 29% have fronted a policy by naming another main driver

  • One in three aggregator customers appear to be manipulating their data

Traditionally, customers looking to obtain a lower premium have given a false address, changed their number of NCD years or insured the vehicle in another person’s name.

Now, with mobile devices such as smartphones using GPS tracking, as well as heightened governance and validation for NCD, consumers have become more sophisticated in the way they manipulate their data.

They are now targeting the details that are not so easy for insurers to check, for example vehicle usage, which cannot be validated through any shared databases. This is reflected in the top five consumer tricks picked up by SSP data at set times in May 2014 and February 2015:

May 2014
1 Vehicle kept overnight location
3 Mileage
4 Occupation
5= Claims
5= Convictions


February 2015
1^ Vehicle usage
2^ Occupation
3— Mileage
4⌄ Vehicle kept overnight location
5⌄ NCD

Although there is, of course, the potential for individuals to make honest mistakes, the nature of these top five consumer tricks makes it unlikely they are genuine errors.


Despite this proven level of data manipulation, only 22% of insurers felt they were dealing with it successfully according to the Insurance Fraud Survey 2015. Across the board, insurers have looked to respond to this problem by loading their prices, resulting in fraud adding an extra £50 to the annual insurance bill for every UK policyholder – whether they are guilty of playing with their data or not.

Perhaps this is due to insurers coming up against a number of barriers in their fight against pre-inception fraud, not least the struggle to identify the actual dishonest individuals who are not known criminals, so that their applications can be investigated further.

By being able to identify these individuals in realtime, insurers can focus on their quality clients and write the risks they wish to write at the correct premium and decline the risks that are clearly suspicious. The simple truth is that these suspects won’t change their behaviour – at least not for the better – so the insurers who don’t take action now will be left with a murky pool of higher risk business.

Unfortunately, without the necessary intelligence at the point of quote, they will be able to quote more competitively for, and thus win, these problem customers, unaware that it’s business they really don’t want to write.

When – not if – this happens, the insurers who are slow to embrace change will need to further load their prices to compensate. Once they have to charge £100 plus extra – while the early adopters have been able to drop their loading – the gap will just get wider and wider. Insurers may feel they can roll with the punches now, but unless they improve their defences, the laggards could soon be on the ropes and questioning whether or not to throw in the towel.

But this is all still a long way off, right? Not at all. At SSP, we have already seen a number of progressive insurers adopt innovative solutions to tackle application fraud. Moreover, in 24 months’ time, we predict 40% of insurers will not only have successfully implemented counter-fraud capabilities, but will also be reaping the rewards from them.


In its interim report, the Insurance Fraud Taskforce reported that “many in the industry under-utilise available commercial software and could make an investment in this in order to reap the rewards”.

This is a ringing endorsement for solutions such as SSP Verify, which enable insurers to capture and monitor the behaviour of individual customers in real-time across the whole insurance market.

The whole of market scope is particularly important. After all, if a sea wall was built along only part of the promenade, it wouldn’t be surprising if the waves came round the side of the structure – and the exact same is true of application fraud.

Unless the defences cover the whole market, dishonest consumers will find a way round them using whichever channel is left unguarded.

Once insurers detect that any data has been tweaked, they can decide whether to push ahead with the quote if the manipulation is minimal, refuse to return a quote at all or else request that the details are verified by a broker or one of their own call centre staff in the direct channel.

Individuals whom the insurer does not wish to quote for, as well as customers whose policies have been cancelled in the past, can be added to watch lists to prevent them returning. Proven ghost brokers and fraud rings, as well as suspect devices, can also be included in these lists so that any activity is flagged up.

By having such acumen at their fingertips, insurers will gain a significant, and potentially insurmountable, advantage over firms that wait to adopt such a solution.


Despite the significant financial price to be paid for not tackling application fraud, the insurance industry is procrastinating in this area, with only 22% of insurers feeling they are successfully dealing with pre-inception fraud.

Yet, this is no excuse for insurers to rest on their laurels. Their competitors are already starting to implement innovative solutions to identify suspect consumer behaviour across the whole market, enabling them to leave behind a pool rich in the higher risk business that insurers just don’t want to write.

With 40% of insurers predicted to be successfully using counter-fraud technology in 24 months’ time, the gap between them and the laggards will only grow bigger. Those insurers who are left behind will need to continuously load their prices to compensate for the fraudulent behaviour they are not detecting, making them less and less competitive against their early adopter counterparts.

So the question remains – shouldn’t you stop riding the wave and start creating it?


SSP is the leading provider of general insurance technology solutions, operating in more than 50 countries across the UK, Europe, Asia-Pacific, Africa and USA.

With more than 30 years’ experience and industry expertise, we develop and implement technology solutions and back office systems that enable our customers to reduce the cost of their operations, increase their distribution and create a better customer experience – improving our customers’ profitability and effectiveness.

Uniquely positioned, with end-to-end visibility “from the insurer to the insured”, we understand the challenges our customers face and leverage our capabilities to provide significant industry value across the entire value chain.


About the Author

SSP Limited

As the leading global supplier of technology systems and software for the insurance industry, our role is to help insurers and brokers operate more efficient businesses. So whether you’re a global insurer or an MGA, a high street broker or a start-up with a smart new idea, we can be trusted to support you on your journey, whatever the destination.

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