Roundtable: Staying ahead of insurance fraud

Insurance Post’s insurance fraud survey 2024 found that opportunistic claims fraud, organised claims fraud, application fraud and identity fraud have all risen in the past 12 months. At a recent roundtable event, sponsored by LexisNexis Risk Solutions, an expert panel discussed the trends insurers are seeing around fraud, and the solutions firms are deploying to keep up with the increasingly sophisticated criminal activity being detected from application to claims stage.

 

What challenges are you seeing in the current environment? Which types of fraud are the most prevalent and which are the hardest to detect?

Fiona Reeve: We have definitely seen a return to the volume of fraud we saw pre-Covid. We have seen opportunistic and organised crime return. We have also seen customers who would historically never have committed insurance fraud either cannot afford MOTs, cause an accident or commit application fraud. That can be challenging as they don’t understand the repercussions of what they are doing.

We have an ID theft model. The ID problem is a really big problem but document fraud is a bigger challenge because the fraud is getting more sophisticated and the technology we are using is struggling to catch up.

Charlotte Brown:  I agree we are back to pre-Covid volumes. What we are seeing is an increase in commercial motor application fraud. The use of the Motor Insurance Database (MID) and commercial ghost-broking and the use of company policies.

What’s hardest to detect is the documents that are being sent to us online. It is hard to see which are genuine and which are shallow-faked.

Pete Ward: Crash for cash still exists, but the striking difference in what we have seen is the rise in opportunistic fraud. Opportunistic fraud can be added to the very long list of challenges that stem from the cost-of-living crisis. It presents a real challenge to insurers as you have to unpick that fraudulent element where there has been a gross exaggeration against what is ostensibly a genuine claim.

The ID problem is a really big problem but document fraud is a bigger challenge because the fraud is getting more sophisticated and the technology we are using is struggling to catch up.

Fiona Reeve, head of fraud, Ageas

Is the increasing use of international documents making it harder to establish genuine identification?

Ben Fletcher: The increase in shallow fakes is a big issue for two reasons. One, there is no way to train your staff to do that work. The only way to attack it is by deploying technology. Then secondly, all of us have different distribution channels, different operating platforms and different processes. So what we may receive as a PDF might have started as a totally different document.

Sarah Durkin: We have seen the same passport, the same photograph with different identifications from different countries but it is the same person whose identity has been hijacked or given to support the crime. The tenants are coming to landlords with all these documents ready… ‘Here’s my passport… here’s my bank statement.’ That to us is a red flag and we are trying to educate landlords as we are dealing with the fraudulent claims that they have a requirement to do proper due diligence.

Charlotte Gray: We are certainly seeing the shallow fake documents. When we would see a copy-and-paste registration with the salary blacked out, now we are detecting algorithmic changes to the document. There’s internal pressure for the claims system to get more dynamic and the life cycle to get shorter and move the claims forward, and it is harder to upskill inexperienced staff.

Angus Rogers: We are a global player in 13 countries. To complicate things further we have delegated partners all over the globe. As we have increased our sophistication around fraud, it is literally everywhere, but that is a challenge for us in getting all our partners on board. We have got to work with those strategic partners but also do a massive, continuous exercise around communication and training. Technology is probably the answer as long as we can embed it.

Neil Woodhead: We’ve seen a big increase in opportunistic fraud, certainly from our own customers and third-party claimants. They are strapped for cash and they see the insurance as an investment. They have been paying their premiums for years. Now that it is hard, it is time they got something back. And that is the real challenge.

On the other side is the technology. Shallow fakes are a real problem and impossible for our handlers to spot. We need technology to do it. We have the same challenge as every other insurer in trying to integrate that technology into your [existing infrastructure]. 

You don’t want to lose that customer journey, you want to pay them fairly, pay claims quickly, but you have got to pick up fraud as well. How you balance the two is a real challenge.

Neil Woodhead, casualty claims, Ecclesiastical

Is opportunistic fraud now an all-year-round problem?

Adele Sumner:  There are increases everywhere. If you go into any insurance business and ask, ‘Have you seen fraud?’, the answer is yes. It is diversifying and the increase is higher.

Also, the cost of committing fraud is lower now. A lot of us talked about shallow fakes, but you can download documents from the internet now. They are so freely available, whereas years ago if you had a template, you would at least have to have a certificate to change it to what you wanted to. So for us the cost of investigating it has also come down. We are technology-based. You have got to be able to investigate quickly and at pace.

Charlotte Gray: The fraudsters don’t discriminate. They are just as likely to commit fraud on a credit policy as they are on an energy policy.

Neil Wood:  It used to be you had to buy two cars and smash them up. Now you can sit in your bedroom, get something online and just change it. It is as simple as that.

Karl Parr:  I think there is a concern about the deterrent. People are seeing that even for convicted fraudsters, the non-custodial sentences are making it worth their while to invest in this sort of thing as they see it as a risk worth taking. If that becomes a growing trend, we are back into fighting the view that fraud is a victimless crime and trying to show there are consequences to doing that.

We’ve been able to implement one solution across claims and underwriting and every line of business that we write. So we have a holistic view of any risk and where that fraud risk is.

Charlotte Brown, underwriting fraud manager, NFU Mutual

Is there tension between people working in fraud and other parts of the business? How do you bring fraud checks into the whole life cycle without compromising customer experience?

Paul Brockway: You often see a disparity between things in underwriting. Quite often that all needs to come into one and organisations need to build those operations into one. It needs to start with the wider piece from aggregators including third parties and claims management companies. It has to be a group effect across the board. And I think underwriting, when it comes to pricing, needs to understand the impact of fraud strategy on their revenue.

Charlotte Brown: We’ve been able to implement one solution across claims and underwriting and every line of business that we write. So we have a holistic view of any risk and where that fraud risk is. What that means is we have got all of our management information, our data in one place and all our reporting coming out consistently. That means we can tell the story to the board, pricing to sales, to whoever needs to hear it about the fraud risk. It gets that buy-in from the top down on why we are stopping customer journeys and why we are putting fraud checks in at various places as we have that at our fingertips.

Ben Fletcher: The problem in the counter-fraud space is there is always an exception to the rule. As an example, we do lots of things at the front end such as checking a vehicle registration links back to a vehicle. But inevitably people move vehicles around, they change plates, so you need to have an exception process to do that. And you then see fraudsters exploit that and change a Ferrari to a 50cc moped to get a Ferrari insured for whatever a 50cc moped would be. How you identify the anomalies is one of the hard bits.

Neil Woodhead: One of the issues we have is that we are very successful at catching the fraudster at the claims stage. Why should we invest in the front end when we will catch them at the back end? We are potentially encouraging fraudsters to take out premiums with us.

It has to be a group effect across the board. And I think underwriting, when it comes to pricing, needs to understand the impact of fraud strategy on their revenue.

Paul Brockway, director of insurance and investments, LexisNexis Risk Solutions

Is AI becoming more prevalent in the fraud space?

Fiona Reeve: We are all investing heavily in AI. Are we as good at it as the fraudsters? No because they are sharing information about the technology they are using. There is no cost to them doing it. If they try it and it fails, they will just try it again.

The other challenge with the technology is we are trying to use it to catch a broad spectrum of fraud even at the application stage. They are only using it to commit one particular type of fraud so their models learn quicker than our models do. To overcome that with the volume of fraud, our retention models are going to learn much quicker than our fraud models are so the AI element is harder for it to learn. You either pick something really narrow, as we have done with ID Theft or pick overall fraud and get the AI to learn itself and, as a human, try to unpick what it has done and why.

Ben Fletcher: We have to ensure we don’t unintentionally seed out people by using a variety of technology. There is a risk of people saying now ‘computer says this is suspicious’. If you are not careful, it can be self-perpetuating. If the models identify 100 cases and you take the top 10%, all you will keep doing is finding the same thing as before. You have got technology to help scale it up but if you don’t have the right operating model and the right people, you are going to end up with the same problem.

Adele Sumner: There has to be another way, where you bring in some different thinking which says ‘Is that enquiry necessary?’, ‘Do we need to do a different enquiry because it is this type of fraud?’

I think there is investing in our people but also investing in the right enquiries, for the right fraud, at the right time. 

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