View the source here.
Brokers play a critical role in detecting fraud. Sam Barrett investigates how technology and collaboration are helping in the fight
An insurance fraud is detected every minute in the UK according to the latest figures from the Association of British Insurers (ABI). But, while the industry spends around £250m a year fighting the fraudsters, collaboration is key to stamping it out.
Although it’s an industry-wide issue, Nick Benham, head of customer services at the Insurance Fraud Bureau (IFB), says that brokers have a pivotal role to play. “Brokers are on the frontline in the fight against fraud,” he says. “It’s important they use all the resources available to them.”
Stopping the fraudsters from taking out policies altogether is a key industry focus, with figures from the IFB showing that new investigations into application fraud have increased by 67% since 2015.
“It’s much better to detect fraud at the point of quotation than after the event,” says Michael Lawrence, personal lines director at LV. “The ABI estimates that fraud costs every policyholder £50 extra a year so, by stopping fraud getting on our books, we can protect our honest customers.”
At application stage, fraud can range from individuals manipulating their details to secure a cheaper premium through to ghost broking.
Spotting it takes some detective work, as Nick Edge, senior fraud manager at Swinton Insurance, explains: “We’re constantly looking for trends and patterns in the data to help us build our risk rules. As an example, because the ghost brokers often use the same details again and again we recently came across one postcode in Aberdeen which has five houses and 500 cars.”
In addition to this analysis, a range of technologies and tools are available to check application data.
Ray Westwick, managing director of Freedom Brokers, explains how his firm uses data enrichment: “During the application process we check multiple databases to validate a customer’s identification, credit history and no claims bonus. We’ve also been able to refine these processes further through analysis of the data we hold.”
This verification process can quickly throw out suspicious applications such as those with a discrepancy between a name and an address or no credit history. Edge says that doing this alone screens out around 11% of all applications Swinton receives.
Device recognition software is another key defence for brokers. This collects data such as the type of device, its location and the internet service provider when insurance is purchased online. Chris Monk, fraud manager at AA Insurance, says this adds another dimension to the checks at application stage. “If you can see a large number of applications coming from the same device you can block them and investigate further,” he explains. “This check also makes policy details irrelevant.”
Striking a balance
As these assessments can be run during the application process, they help brokers strike a balance between counter fraud interventions and a smooth journey for genuine customers. However, while some fraudulent applications will be blocked automatically, others require further investigation.
Monk says that where there’s a grey area, customers are pushed down a validation route. “We’ll ask for proof of address or their V5 if it’s motor insurance. This is fine for a genuine applicant, and it may simply be an anomaly on their application that can be corrected,” he explains. “A fraudster won’t be able to supply this information.”
His firm also runs reports on payments and policy conversions. This can identify mismatches between the cardholder and policyholder name as well as flagging up warning signs such as high premium values and overseas card issuers.
“We can also pull out applications where someone’s attempted to pay with different cards before payment was accepted,” he adds. “Where the names on the cards are different, warning bells ring.”
Although technology gives brokers a huge advantage in the fight against fraud, more traditional methods are used too. For example, as ghost brokers will often steal someone’s identity to enable them to take out a policy, BGL sends welcome postcards to new customers. This ensures they know a policy has been taken out and enables any ghost brokers to be detected quickly.
Protecting the customer
With almost nine million customers across its business, fraud is taken very seriously at BGL.
“Seven years ago we had a couple of people working part-time on fraud,” says Julia Walker-Smith, associate director, fraud at BGL Group. “Today, we have a team of 24 detectives, backed up by data scientists and technologists.”
Technology plays an important part in the group’s fraud strategy, with over 20 controls deployed to detect and prevent the fraudsters. Wherever possible it looks to catch fraud before it’s on the book, with more than 750 key factors and clues in place at application stage to flag up a potential problem.
While technology is invaluable for drilling into the data, the personal touch is essential too with these cases investigated by the group’s detectives. Walker-Smith says this approach can really add value.
“Our detectives might identify a new fraud trend, enabling us to introduce a new control to counter it. It can also lead to further investigation, with a recent case uncovering a further 800 potential leads,” she explains. “Fraud prevention is a continuous cycle.”
Collaboration with insurers is another fundamental part of its strategy, and BGL also joined the Insurance Fraud Bureau in May to support intelligence sharing across the industry. “We work closely with insurers to ensure the work we do to tackle fraud is aligned,” adds Walker-Smith. “As an industry, we must do everything we can to protect our customers.”
While brokers are building effective counter-fraud strategies within their own businesses, sharing this intelligence is key to stamping out fraud. This was part of the thinking behind the IFB’s creation of a new broker membership model back in 2014.
“By opening intelligence sharing to a wider broker audience we could further strengthen the industry’s fight against fraud,” says Benham.
Since the launch, six broker firms have joined the IFB – AA, Swinton, Carole Nash, Premium Choice, Carrot Insurance and BGL – enabling them to access benefits such as quarterly intelligence meetings, training and six-monthly reviews.
Although these are some of the larger firms, Benham is keen to point out that smaller brokers can also benefit from intelligence sharing through the IFB. “As well as fraud conferences and British Insurance Brokers’ Association events, brokers can also share intelligence through the IFB’s Cheatline to ensure the fraudsters are caught as early as possible,” he explains. “We will investigate any call that comes in to us.”
There’s plenty of encouragement from the insurance industry to work more closely on fraud. “Insurers want to help brokers fight fraud,” says Lawrence. “A large broker may have their own team or be a member of the IFB but smaller firms should turn to their insurers for support and services to help prevent fraud. We don’t want to duplicate fraud detection work.”
While technology is making it easier to identify potential fraudsters, the essential weapons in the fight against this form of crime remain collaboration and information sharing. “We can’t deal with fraud in silos,” adds Benham. “By working together and sharing the intelligence we receive, we can beat the fraudsters.”