UK: Update on insurance fraud – Insurance Fraud Taskforce publishes its final report

The Insurance Fraud Taskforce has this week published its final report on insurance fraud, which sets out numerous recommendations for tackling fraud. The recommendations echo suggestions made in our previous blog from July 2015, and include raising public awareness of the issue and improving cooperation and data-sharing between insurers and other organisations. The Taskforce, chaired by David Hertzell, is made up of representatives from various insurance organisations including the Association of British Insurers (the ABI), the British Insurance Brokers' Association (BIBA) and the Insurance Fraud Bureau (IFB), and its work is supported by HM Treasury and Ministry of Justice officials. The 86 page report comes at the end of the Taskforce's year-long review into insurance fraud and focuses in particular on personal injury claims. The problem The annual size of detected insurance claims fraud is over £1 billion, while the estimated level of annual undetected insurance fraud is over £2 billion, according to statistics from the ABI. Each year the industry spends over £200 million tackling fraud. The Taskforce note that there are also wider consequences that insurance fraud has for society, including funding crime, impacting public services, causing social nuisance (through nuisance calls that pressurise consumers to make claims) and raising frictional costs on British business. Furthermore, the Taskforce stresses that "fraud is socially corrosive and undermines social cohesion by eroding trust". The report identifies various types of insurance fraud and recognises that fraud "exists on a continuum", ranging from "otherwise honest people indulging in opportunistic low-value crime" right through to sophisticated organised crime. The report notes that many of those who commit fraud believe they are stealing from a faceless corporation. A challenge for the insurance industry is to shift this view and make consumers understand that insurance fraud is not a victimless crime: the costs are paid by their families, friends and neighbours through higher insurance premiums. Recommendations Much is already being done by the insurance industry to tackle insurance fraud – as we discussed in our blog in July 2015 – and the report acknowledges existing efforts to collaborate on issues such as fraud detection and data sharing, through organisations such as the IFB. Nevertheless, the report suggests much more needs to be done, and emphasises industry solutions rather than legislative changes as the primary way forward. Key recommendations include:

  • A long-term cross-industry public communications strategy to improve consumer trust in the insurance sector and tackle the perception that insurance fraud is "fair game";
  • Improving the data available in fraud databases and data sharing schemes, and ensuring data is shared appropriately;
  • Coordinating and sharing best practice;
  • Taking a more robust approach to defending claims – the industry should defend more court proceedings where they believe a claim is fraudulent, rather than providing cash settlements;
  • Improving cross-industry coordination to tackle premeditated claims, by establishing the IFB as a holistic intelligence hub;
  • Toughening action against dishonest solicitors;
  • Improving communication between insurers and the regulators of professionals that enable fraud;
  • Strengthening regulation of Claims Management Companies;
  • Clamping down on nuisance callers that encourage fraudulent claims;
  • Tackling fraudulent claims for noise induced hearing loss – a growth area for insurance fraud; and
  • Improving the ability of aggregators (price comparison websites) to detect fraud at the point of quote.

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