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Unlocking insights: key highlights from the latest ABI Report on fraud in insurance claims

insurance claims

In the ever-evolving landscape of insurance, staying ahead of fraudulent activities is vital. The Association of British Insurers (ABI) plays a crucial role in this arena, annually collecting and analysing data to provide a comprehensive view of the detected fraud landscape within the insurance industry.

Join us as we explore the latest findings from the ABI Report, as we focus on fraud detection, prevention and what insurers need to be aware of.

Why does the ABI collect fraud statistics?

The ABI annually collects data on detected fraud to offer its members and stakeholders insights into the prevalence of fraud in both application and claims stages. This information serves as an indicator of the detected fraud’s impact on the insurance industry, allowing individual insurers to assess their exposure and take proactive steps to mitigate risks.

However, ABI’s fraud statistics are not an exhaustive account of all fraudulent cases encountered by insurers, and the report does include instances where there has been a conviction, caution or when compelling evidence of fraud exists.

Here, we see that the limitations in reporting stem from the challenge of measuring cases where insurers prevent an individual from obtaining coverage through automated fraud defences, or when claims are dropped due to insurers probing loss circumstances. As a result, despite efforts to increase these convictions, the current shortage of police resources, for example in regional forces, slows down the investigation and enforcement of suspected fraud cases.

It’s because of this that the ABI has recognised the need for a broader understanding of fraud and has developed a list of scenarios believed to involve fraud.

What is the ABI’s criteria for suspected insurance fraud?

The ABI not only tracks detected fraud but also gathers information on suspected cases. These involve situations where handlers harbour a genuine suspicion of fraud, leading to challenges to applicants or claimants, as well as instances where applicants withdraw claims without credible explanations or fail to provide essential documentation contribute to the suspected fraud category.

Understanding that not all claims signify suspected fraud, however, the ABI’s criteria chooses cases where a reasonable suspicion triggers investigation, though routine scenarios like lapsed quotes or withdrawn claims without suspicion and challenge are excluded from this definition, providing a more accurate portrayal of suspected fraud.

Is detecting fraud a complex task?

Yes, absolutely.

Insurance claims investigations for fraud are not commonplace, and only a fraction undergo scrutiny by in-house counter-fraud specialists or chartered loss adjusters. These specialists operate within the regulatory framework set by the Financial Conduct Authority (FCA) and their professional standards, ensuring that privacy laws are strictly adhered to.

Interestingly though, investigation processes can often involve standard checks against fraud indicators, leveraging open-source data like social media, and consulting industry databases. This is not something perpetrators tend to think of when committing their acts, and so can be a handy tactic to catch fraudulent activities.

However, claimants are typically informed about these processes at the policy’s inception, maintaining transparency, and whilst most investigations are conducted with the claimant’s knowledge, alternative face-to-face interviews may be initiated to gather comprehensive information directly and evaluate behavioural traits also.

What do insurers need to be aware of?

The ABI’s expanded scenarios aim to capture instances where fraud may be involved, even if innocent explanations exist. Though the unfortunate truth is that actual criminal convictions represent only a fraction of the fraud insurers and society face daily.

Successful fraud often goes undetected, especially in automotive related claims such as whiplash. This highlights the ongoing challenges in quantifying the true extent of fraudulent activities, and although increasing convictions is a shared goal, resource constraints in law enforcement pose a significant hurdle.

For insurers, the ABI’s latest report sheds light on the multifaceted nature of fraud detection in insurance claims. The data reveals the challenges in quantifying the true scale of fraud, emphasising the need for collaborative efforts to combat this persistent issue.

As insurers navigate this landscape, staying informed about the evolving patterns and leveraging innovative detection measures will be key to ensuring a secure and resilient insurance industry, and working with the right partners can be the perfect place to start.

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