More data sharing at heart of taskforce plans to tackle insurance fraud

Insurers should collaborate further on data-sharing initiatives aimed at reducing insurance fraud, according to a government-commissioned report.21 Jan 2016

The Insurance Fraud Taskforce has recommended increasing membership of existing anti-fraud schemes and databases such as MyLicence, which provides insurers with access to driver data held by the DVLA, and central database the Claims Underwriting Exchange (CUE) among 14 recommendations in its final report. Better "quality and quantity" of data available to these initiatives would speed up fraud detection, and could be made available to consumers when applying for a quote rather than having them rely on their memories, the report said.

Greater use of 'unique identifiers', such as driving licence and National Insurance numbers, would also improve the consistency of data records as would the adoption of a standard, cross-industry definition of fraud, according to the task force. In addition, price comparison websites and other "aggregators" should also more closely monitor suspicious consumer behaviour, and should share this data more "effectively" with insurers, according to the report.

The task force heard evidence that the move towards purchasing insurance online had "depersonalised" the process, "reducing some of the technical and cultural restraints and increasing the opportunities for fraud".

"The insurance industry must adapt its processes to be as rigorous as possible at the application stage," it said.

Of the 14 recommendations made by the task force in its final report, one was specifically aimed at reducing application fraud while three were aimed at "opportunistic" and three at "premeditated" fraudulent claims. The remaining recommendations on data sharing, collaboration and defending claims had relevance across all fraud types, the task force said.

Set up by the UK government in January 2015, the Insurance Fraud Taskforce was chaired by David Hertzell of the Law Commission and made up of representatives from the Association of British Insurers (ABI), the British Insurance Brokers' Association (BIBA), Insurance Fraud Bureau, Financial Services Consumer Panel, Citizens Advice and the Financial Ombudsman Service. It was set up to investigate the causes of fraudulent behaviour and recommend solutions to reduce the level of insurance fraud, with the ultimate intention of lowering costs and protecting honest consumers' interests.

Over £1 billion worth of fraud is detected by the insurance industry each year but undetected fraud is estimated to cost the UK economy twice this amount and adds an estimated £50 to the cost of insurance premiums every year, according to the report. Among the drivers of this is the fact that those who commit fraud tend to consider it as a "victimless" crime, while media reports provide negative views of the insurance industry and imply that the chances of being caught are low, the researchers said.

As an initial step, industry bodies including the ABI, Insurance Fraud Bureau and Insurance Fraud Enforcement Department (IFED) should develop a long-term cross-industry public communications strategy, aimed at tackling these negative perceptions of the insurance industry and improving consumer understanding of insurance products and claims processes. The ABI and Chartered Insurance Institute (CII) should also look into the use of behavioural economics as a means of preventing application fraud, the task force said.

The Information Commissioner's Office (ICO) should develop clear guidance on data-sharing practices in relation to insurance fraud, helping insurers to understand the extent to which they were permitted to share information in compliance with the Data Protection Act, the task force said. Insurers should also coordinate and share best practice on fraud prevention, backed by voluntary best practice guidance based on what the most effective firms are doing to be developed by the ABI, it said.

The report also recommended further legal changes to reduce exaggerated or fraudulent claims, building on the whiplash reforms announced by the government as part of the 2015 Autumn Statement. Tougher action against dishonest solicitors, claims management companies (CMCs) and "nuisance callers that encourage fraudulent claims", particularly those operating i the personal injury sector, was also recommended.