Insurance fraud 2012: On the rise, opportunistic and online

Insurance fraud 2012: On the rise, opportunistic and online Insurance fraud 2012: On the rise, opportunistic and online 1

Forewords During these turbulent economic times, our industry faces a very real threat from the alarming increase in both opportunistic and organised crime. The Insurance Fraud Investigators Group (IFIG) is therefore delighted to once again work with Ordnance Survey to identify its members fraud experiences and better understand how the industry can work collectively to combat insurance fraud. IFIG was established in 1999 as a non-profit making organisation to tackle the growing problem of insurance fraud at grass roots level in the UK and disrupt insurance fraudsters. We now have over 320 company members covering the vast majority of the insurance industry and insurance fraud investigators. The Specified Anti-Fraud Organisation status awarded to IFIG in 2008 has enabled us to build upon our relationships with the public sector and law enforcement agencies and has supported our key aim of working together to detect, disrupt and prevent insurance fraud. It will come as no surprise that this year s Insurance Fraud 2012 report highlights a growth in insurance fraud, fuelled largely by today s tightening recession. Our members reveal an increase in both opportunistic fraud at policy application and point of claim, as well as activity by organised criminal gangs. It is reassuring to see that insurers are responding to this trend by moving fraud up the corporate agenda and increasing investment in fraud detection. Insurers are very aware of the real need to balance fraud detection with providing genuine customers with the service levels they deserve. By detecting fraud at application stage, insurers can eliminate costly and time consuming efforts later in the insurance cycle. The report also offers an interesting insight into those tools used to support fraud detection efforts, with social media tools further enhancing geospatial analysis during investigations. Location-based intelligence is also emerging as a resource with the potential to play an integral role in prosecuting fraudsters. Encouraging the industry to work collaboratively to combat fraud is a key goal for IFIG. We are therefore reassured to read that data sharing was identified by respondents as being a key weapon in the fight against fraud. This year s survey confirms that insurance fraud is still on the rise. IFIG s raison d être is to ensure our members do not feel they are fighting fraud in isolation, but working together to tackle the fraudsters. Collectively, the industry has moved on considerably in terms of fraud detection. Together, we really can make a difference. David Philips IFIG Chairman 2 Insurance fraud 2012: On the rise, opportunistic and online

This is the third year that Ordnance Survey has conducted this survey in conjunction with the Insurance Fraud Investigation Group. And, for the third time, it is the recession that is making the headlines. Our survey, Fraud 2012: on the rise, opportunistic and online, has shown yet again that the recession is fuelling fraudulent applications and claims. This is compounded by the increased cost pressures facing financial services companies, which must justify additional investment in the detailed data, technology and human expertise needed to prevent and fight fraud. Fraud 2012 provides clear evidence that the industry takes this threat seriously, with increasing numbers of counter-fraud professionals using geographic data as an added tool in their armoury. This detailed data can pay dividends in detecting fraudulent behaviour, enabling investigators to identify when false addresses are used or receipts for claims are passed along neighbouring streets. Clearly organised fraud is a growing problem, with 44% of respondents seeing increased activity from criminal gangs. But it is opportunistic fraud that is gaining ground in these troubled economic times as hard-pressed policy holders see an opportunity to boost income by exaggerating their claims or making completely bogus claims. After all, it doesn t hurt anyone does it? The industry needs to make sure the public understands that insurance fraud is theft and that it does hurt people responsible, honest policy-holders who face higher premiums to cover the cost of fraud. And irresponsible advertising that promotes personal injury claims for trivial accidents needs to be countered; again there is a real cost, with small businesses and local councils facing inflated costs they can ill-afford. While it is early days for the Insurance Fraud Register, I believe this will go a long way to educate the public that fraud is a crime and to improve data sharing that is so effective in the fight against fraud. Ordnance Survey is proud to work with the IFIG and other counter-fraud professionals, industry, trade bodies and other government agencies and departments to help reduce the harm created by fraudsters of all kinds. Sarah Adams Ordnance Survey Insurance fraud 2012: On the rise, opportunistic and online 3

4 Insurance fraud 2012: On the rise, opportunistic and online

Executive summary The UK insurance industry provides an important safety net for millions of UK households and businesses. When the worst happens, be it fire, theft, flooding or accident, it is the insurance industry that provides the financial lifeline to get families and businesses back on their feet. On average, the industry pays out 9.8 million every day to households and 22.4 million per day to motorists 1. As traditional buffers of easy credit and savings are eroded, an insurance policy can be the last line of defence. Yet the industry is under pressure. With consumers feeling the chill wind of austerity, the temptation to convert monthly premiums into a lump sum payment can be too much. Last year, fraudulent activity surged 23%, with fraud accounting for 11 in every 10 000 applications and claims 2. According to the Association of British Insurers, the cost of insurance fraud now tops 2 billion a year, adding an extra 44 a year to the premiums of every UK policyholder. Other studies suggest the fraud bill could be as much as 10 billion a year 3. Combating fraud could save the industry billions of pounds and, more importantly, ensure that this vital safety net is affordable for all. Ordnance Survey, which provides location intelligence to help insurers detect fraudulent activity, asked members of the Insurance Fraud Investigators Group (IFIG) about their experiences of fraud. IFIG brings together insurers, lawyers, loss adjusters and investigation agencies to tackle the growing problem of insurance fraud in the UK. The survey took place during August 2012 and builds on earlier surveys in 2009 and 2010. Ordnance Survey asked Marketforce Business Media to analyse the results, assessing them in the light of both the earlier survey findings and recent market developments. The findings confirm that insurance fraud is on the rise, and insurers fear there s more to come as the recession tightens its grip. The industry is rising to the challenge; investing in people and technology to prevent, detect and prosecute fraud. But there is much more to do, with insurers calling for improved data-sharing, measures to tackle the growing menace of fraudulent applications and for aggregators to step up to their fraud-prevention responsibilities. 1 Figures from the Association of British Insurers, 2010. 2 Experian, April 2012. 3 PFK (UK) LLP and the University of Portsmouth, 2012. Insurance fraud 2012: On the rise, opportunistic and online 5

Key findings Insurance fraud is on the rise. Almost three-quarters (74%) of respondents report an increase in fraudulent claims since the beginning of 2012. Motor and personal injury classes are most vulnerable. The recession is expected to fuel further rises in fraudulent behaviour. The evidence suggests that the recession is already driving an increase in opportunistic claims from policyholders, with 85% of respondents reporting an increase in inflated or exaggerated claims this year and 76% reporting an increase in completely bogus claims. Fraud isn t just about claims. Fraudulent policy applications are a growing concern for insurers, with 40% reporting an increase in the number of people lying on application forms to save money on policies and 44.5% reporting an increase in the volume of fraudulent policy applications this year. This has been a top-three concern for insurers since 2009. 70% of companies have moved fraud up the agenda in the last year and 74.5% have increased investment in fraud detection. Despite this, the availability of adequate resources to tackle fraud remains a top-three concern for companies. The top-three concerns: recession, resources and policy inception Year Top answer Second answer Third answer 2012 Recession fuelling fraud Increased fraud at policy inception Resources 2010 Recession fuelling fraud Resources Increased fraud at policy inception 2009 Recession fuelling fraud Increased fraud at policy inception Resources Cross-industry data-sharing is seen as a key tool in combating fraud, yet two-thirds of respondents said data-protection issues impede effective data-sharing. This was a particular concern for policies originated through aggregator sites, with 77% saying data-sharing with aggregators would help prevent fraud. 95% of respondents said aggregators should take a more active role in preventing fraud. Eight out of ten respondents use geographic data to fight fraud, with 42% using it to identify fraud hotspots and analyse patterns. Only 12.5% use geography to build evidence for prosecution, suggesting there is scope for location-based intelligence to play an increased role in prosecuting fraudsters. Social media is a fast-emerging tool for insurers. Geospatial analysis of social media postings could provide investigators with a key weapon in the future. Recession doesn t turn honest people crooked, it just accelerates the issue Leonard Brimson, European Head of Fraud, Zurich 6 Insurance fraud 2012: On the rise, opportunistic and online

Insurance fraud 2012: On the rise, opportunistic and online 7

Claims: on the frontline Claims handlers are on the front line of the battle against the fraudsters. This is where fraudulent activity is most apparent, with 74% of respondents reporting an increase in fraudulent claims in the first eight months of 2012. Some of the rise can be attributed to increased detection as the industry s defences become more sophisticated. According to the Association of British Insurers (ABI), the sector is detecting more fraud than ever, uncovering more than 2 500 fraudulent claims, worth 18 million, every week. Home insurance accounts for 66 000 bogus or exaggerated claims detected, followed by dishonest motor insurance claims at 40 000. Motor fraud is far more costly, however, adding up to 466 million. According to our research, motor and personal injury insurance have seen the greatest increase in fraudulent activity this year, but there are fraudulent claims across all classes. 8 Insurance fraud 2012: On the rise, opportunistic and online

Insurance fraud 2012: On the rise, opportunistic and online 9

The recession: a real and present danger As the economy continues to shrink and some commentators point to the possibility of an unprecedented treble-dip recession insurers fear conditions are ripe for further fraudulent activity. The evidence suggests that the recession is already driving an increase in opportunistic claims from policy holders, with 85% of respondents reporting an increase in inflated or exaggerated claims this year and 76% reporting an increase in completely bogus claims. One policyholder attempted to claim for a 40-inch television stolen from a caravan. He told me the thieves took it out through a bathroom window, but when measured the window only opened to a gap of six inches. The opportunistic nature of the fraud is backed by the high volume of fraudulent claims, but a relatively small increase in monetary value of the claims. Over three quarters (78.9%) of respondents report an increase in the number of fraudulent claims, but only 43.8% saw an increase in the monetary value of claims. A claim was made for the theft of a motor vehicle that was eventually found at the bottom of a canal. CCTV captured the policyholder pushing the car in himself. There is also a very real threat from organised criminal activity, with 44% saying they have seen increased activity from criminal gangs. This includes: Criminals targeting policyholders, so-called ghost-broking to elicit premium payments from consumers for non-existent cover. Criminals targeting insurance companies directly, usually staged accidents known as crash for cash. Ghost broking is probably the stand-out fraudulent activity this year. Those involved are attacking the soft underbelly of the industry, leveraging the relative anonymity of the Internet and feeding off reckless and naive consumers. Glen Marr, Director of Fraud, 1st Central As well as concerns about fraudulent claims and organised crime, insurers are also worried about fraudulent policy applications, with 40% reporting people lying on application forms to save money and 44.5% reporting an increase in the volume of fraudulent policies incepted this year. This has been a top-three concern in all three surveys, although recent research suggests the industry is getting better at identifying and blocking fraudulent applications 4. Application fraud is a sign of the times it s very easy to change postcodes and date of birth to compare prices and get the cheapest quote, but it is fraud. It s an IT-based evolution, because IT makes everything more anonymous you couldn t walk into several different brokers pretending to be different people to get quotes. Leonard Brimson, European Head of Fraud, Zurich 4 Attempted fraud fell by 16% in the second quarter of 2012, with 10 in every 10 000 applications for insurance products found to be fraudulent, down on 12 in every 10 000 applications a year ago. Experian Fraud Index, August 2012. 10 Insurance fraud 2012: On the rise, opportunistic and online

The fightback Insurers are not taking the increased threat from fraudulent activity lying down. According to the ABI, the industry is detecting more fraud than ever. Indeed, according to one study, the industry outperforms much of the corporate world for its fraud resilience 5. Insurers invest 200 million plus per year in their anti-fraud staff and systems Those investments saved over 900 million in claims payments in 2011. Phil Bird, Director, Insurance Fraud Bureau The companies we surveyed place fraud high on the corporate agenda. Seven out of ten report that fraudulent activity has moved up their organisation s agenda in the last 12 months and 74.5% report increased investment in fraud detection. 69% saw increased investment targeted at staff, 64% in fraud detection systems and 45% in front-end procedures. Location intelligence plays a key role in the fight against fraud, with 83% of respondents using geography. 5 The UK insurance industry scored 36.9 on a 50-point scale compared with 30.6 for the private sector as a whole. The Resilience to Fraud of the UK Insurance Sector by PFK and the University of Portsmouth, May 2012. Insurance fraud 2012: On the rise, opportunistic and online 11

Gaps in the armoury Respondents identified data-sharing as a key weapon in the fight against fraud. Yet data-protection issues are seen as a block to effective data-sharing by 65% of respondents, with 63% also saying that there was a lack of understanding of the Data Protection Act 1998. The EU Data Protection Directive, which is set to supercede the 1998 legislation, is likely to add to this confused picture. Glen Marr, Director of Fraud at 1st Central believes that access to data is not the only issue; using [data] effectively and efficiently in an operational environment is another major challenge for insurers. Insurers have used the Insurance Fraud Bureau to become very effective at sharing data This has been in a spirit of non competition, through strong adherence to data protection rules with the aim of establishing the broadest possible market picture of potential fraudulent activity [However] the proposed scope of the EU Data Protection Directive is very concerning at this stage and if carried through would make sharing data for anti-fraud purposes difficult Phil Bird, Director, Insurance Fraud Bureau. Aggregator sites are seen as a gateway for fraudsters. 95% said aggregators should take more responsibility to prevent fraud. Again, data-sharing is a key issue; 77% said data-sharing between insurers and aggregators would help, 70% wanted aggregators to link to the Claims and Underwriting Exchange (CUE) or the Insurance Fraud Register (IFR) and 66% wanted aggregators to undertake the same checks as them, such as address validation, credit check, and electoral role checks. Phil Bird, Director of the Insurance Fraud Bureau argues that aggregators are starting to take a more proactive approach. Aware of their market power and the wealth of data that they possess on insurance buying habits, Phil observes that aggregators are increasingly realising the role that they can play in mitigating application fraud risks and are applying front end tools to do this. Insurers can play a role in advising aggregators on the most effective fraud prevention methods and Phil believes that engagement between insurers and aggregators is a positive step in the fight against application fraud. Glen Marr, Director of Fraud at broker 1st Central believes that aggregators and brokers are at the coal face of the industry s exposure to application fraud. In Glenn s view the more data that can be collected and shared at application stage, the harder [it will be] for fraudsters targeting the industry. His focus is on mitigating the impact that fraud has on inflating premiums for genuine insurance consumers. Application fraud, which extends to ghost broking, remains the industry s Achilles heel. Glen Marr, Director of Fraud, 1st Central Despite increased spend on people and systems to beat fraud, resources remain a top-three concern for organisations. Cost-savings pressures, increased workloads and the need to make decisions quicker under Ministry of Justice reforms, mean that those tasked with preventing fraud need to work smarter to stay ahead of the fraudsters. 12 Insurance fraud 2012: On the rise, opportunistic and online

Insurance fraud 2012: On the rise, opportunistic and online 13

Respondents were ambivalent about the impact of the Insurance Fraud Register, with 54% expecting the number of fraudulent claims to remain the same. The Insurance Fraud Enforcement Department fared better, with 56% expecting the specialist police department to reduce the number of fraudulent claims, possibly because of the strong deterrent effect of successful prosecutions. At 1st Central, Glen Marr s work in conjunction with IFED has resulted in 2 of IFED s first five successful fraud convictions. He continues to refer new fraud cases to IFED each month, viewing IFED s role as integral to increasing successful prosecutions. Phil Bird concurs that prosecution rates are increasing, but strikes a note of caution; the forthcoming Consumer Insurance Act will make it harder for insurers to cite non disclosure as a reason for declining a claim and once this Act is passed it could mean that fewer cases will go to prosecution. Until the risks and consequences of insurance fraud are publicised and the Act viewed as real crime, policyholder attitudes will remain a continuing cause of volume fraudulent activity. Despite some recent high-profile cases for organised crash for cash scams 6, prosecution levels for insurance fraud remain low, making it an expensive and high-risk deterrent. This is often because of the difficulties of building evidence for prosecution. Location intelligence can play a key role in building an evidential case, yet only 12% of respondents use geographic data for this purpose, down from 25% in 2010. Leonard Brimson, European Head of Fraud at Zurich, believes that in cases of fraud, insurers should prosecute, but that it is critical not to lose sight of the legitimate customer, Our first priority is to our shareholders and a duty of care to honest policyholders. Our second priority is prosecuting the fraudsters. It can be cost-negative to prosecute, but it does send the right message. This indicates that there is scope to leverage this technology to successfully prosecute fraudsters and send out a strong deterrent. 6 In August 2012, an insurance cheat was jailed for seven years for faking hundreds of road traffic accidents in a bid to make insurance claims worth more than 6.5 million. The successful prosecution was a result of Aviva and the Insurance Fraud Bureau working together to track the complex fraud. 14 Insurance fraud 2012: On the rise, opportunistic and online

Data analytics spotting the patterns, boosting the bottom line Organisations have never had access to so much data. From online satellite imagery to social media postings, it is easier than ever before to map the lives of customers. Yet the sheer volume of data, the accelerating pace of digital change and the looming challenge of regulatory compliance, mean organisations struggle to make best use of this resource. And the stakes are being raised as criminals harness new technologies to attempt ever more subtle and sophisticated crimes. This is where data analytics can provide an edge, allowing insurers to enhance their intelligence, detect more fraud, reduce costs and, through improved customer insight, deliver better customer service. Data analytics could play a key role in the fight against fraud, but organisations need to understand their compliance responsibilities and build an integrated approach to handling and sharing data in order to use this technology effectively. Legal experts also caution that investigators must comply with UK legislation regarding privacy and data protection when using social media. Social media platforms arguably represent a grey area by nature of the fact that they are public domain and individuals manage their own privacy settings, says Peter Oakes, Head of Fraud at law firm Hill Dickinson. It is important that investigators ensure they are compliant with the terms and conditions of the site they are using. Location intelligence already plays a key role in the fight against fraud, with 83% of respondents using geography. Yet there is scope to use this intelligence better to spot more fraudulent activity. Despite industry concern about fraudulent applications, only 4.4% of respondents use location intelligence to detect fraud at policy inception. Location intelligence could be used to verify the property to be insured actually exists and alias addresses. Address life cycle information can help to confirm the current address status from planning right through to demolition. It also exposes fraudsters using old addresses. Social media, such as Facebook, YouTube and Twitter, play an increasingly important role in bringing fraudsters to book. Investigators already use social media postings to disprove a policyholder s alleged injuries or to link apparently unrelated claimants in an induced collision. Yet there is scope to drill deeper by using geospatial analysis. Peter Oakes, Head of Fraud at Hill Dickinson, argues that it is important to be able to establish whether two people, who aren t meant to be known to each other, are linked and investigations conducted via social media platforms are regularly successful in verifying associations. Increased availability of geographic data will assist fraud investigations and in some cases could be crucial. This could prove a key weapon moving forward, allowing investigators to prove a claimant was in a particular place at the time of an incident, for example. One notable case was a bus claim where the driver turned out to be Facebook friends with 28 of the 30 passengers. We discovered he had sold seats on the bus to his friends for 500 a time in the hope they would each win back 2 500 in injury claims! Recent case law illustrates that the use of evidence from social media websites is increasingly being accepted by the courts as a legitimate way of proving fraud. Peter Oakes, Head of Fraud, Hill Dickinson Insurance fraud 2012: On the rise, opportunistic and online 15

Conclusions and recommendations Insurance fraud, both at policy inception and at the claims stage, is on the rise and our respondents fear that financial stress will continue to fuel fraudulent behaviour. The industry is aware of the threat and is allocating resources accordingly, with increased investment in staff, fraud-detection systems and front-end procedures. There is widespread confusion about the Data Protection Act, blocking effective data-sharing across the industry. With the EU Data Protection Directive heading our way, organisations need to make sure their people and systems are ready to work effectively while meeting their data protection responsibilities. Location intelligence can help with data-sharing. Ordnance Survey s AddressBase products, for example, include the UPRN assigned by the local authority to each property at planning stage. The UPRN stays with a property until demolition. By using the UPRN, rather than the address, companies can link case information to geographic information and share data without providing client confidential information. Aggregator sites are seen as a weak point in the industry s fraud defences. The industry needs to pull together to ensure a consistent approach. The ubiquity of social media presents a real opportunity for companies to spot patterns and build evidence for prosecution. Organisations need to stay up-to-date with this fast-moving sector in order to effectively mine this rich data seam. Location intelligence can identify fraud hotspots and aid pattern analysis. The latest technology from Ordnance Survey provides enhanced data: up-to-date aerial photography rather than satellite imagery; sorts data at address level rather than postcode banding; and speeds surveying capacity by 180%. There is scope to use location technology more effectively: to use geospatial analysis of social media postings; to facilitate data-sharing without breaching client confidentiality; and to use up-to-date aerial photography rather than satellite imagery. Theft is theft and something needs to be done to stamp on this before it gets totally out of control. 16 Insurance fraud 2012: On the rise, opportunistic and online

Appendix Supplemental interviews Interview with Phil Bird, Director, Insurance Fraud Bureau How frequently do fraud cases go to prosecution and how could that number be increased? We can t say how frequently fraud cases go to prosecution as we only see a small subset of the industry s fraud cases. What we can say is that there is an increasing willingness of all of those involved in the anti-fraud sector to prosecute fraudsters. This has come from the recognition of the impact fraud is having on insurer s underwriting results, the premiums the public pay and in 2012 the establishment of IFED. As the industry learns from its work with IFED, we will without doubt see more cases go to prosecution and more convictions. The forthcoming Consumer Insurance Act could make it harder for insurers to cite non-disclosure as a reason for declining a claim. This could lead to less cases going to prosecution. What data do you need to build an effective prosecution case? It s less a case of data and more a case of building effective evidence packages. Insurers are extremely good at building the case to decline a claim where fraud is suspected and over many years, this has been the prime focus of their claims teams. To make the most out of the current enforcement regime through IFED, insurers will build their skills in producing strong evidence packages that lead to effective prosecutions. What are the main barriers to data sharing between supplier, third parties or industry peers? Insurers have used the IFB to become very effective at sharing data between themselves. This has been in a spirit of non competition, through strong adherence to data protection rules with the aim of establishing the broadest possible market picture of potential fraudulent activity, something which couldn t happen if insurers acted in isolation. The IFB as a non-profit body occupies a neutral position that insurers feel comfortable with and which allows effective data-sharing to take place. What impact will the forthcoming EU Data Protection Directive have? The proposed scope of this legislation is very concerning at this stage and if carried through would make sharing data for anti-fraud purposes difficult. However there are strong voices being raised against certain of the early proposals and our industry is being strongly represented by the ABI in consultations with the government and ultimately the EU. Where should insurers focus their investment efforts to effectively combat fraud? Specialist fraud staff Training existing staff to spot fraud Fraud detection systems Building a database All insurer models are different so it is impossible to say that one or any combination of the above is what insurers need to invest in. What we do know is that insurers invest 200 million plus per year in their anti-fraud staff and systems and virtually all of those insurers invest in some or all of the elements described above, plus, others that aren t mentioned. Those investments saved over 900 million in claims payments in 2011. What more can aggregators do to help combat fraud at policy inception? Aggregators have a market power that means there are tens of millions of quotes going through their sites every year. This gives them a unique picture of the buying habits of insurance consumers that not even our largest insurers can hope to have. Those consumer buying habits include some, unfortunately, dishonest traits which can result in what is commonly termed application fraud. Aggregators are increasingly realising the role that they can play in mitigating the application fraud risks and are applying front end tools to help them to do that. They are increasingly engaging with the industry in how to do this. Insurance fraud 2012: On the rise, opportunistic and online 17

Interview with Glen Marr, Fraud Director, 1st Central What more can aggregators and brokers do to help combat fraud at policy inception? Aggregators and brokers are at the coal face of the industry s exposure to application fraud. The more data that can be collected and shared at application stage, the harder we can make it for fraudsters targeting the industry and the better we can protect genuine insurance consumers from the impact of fraud on their premiums. What are the main barriers to data sharing between suppliers, third parties or industry peers? Given that legislation exists to enable data sharing for fraud prevention purposes and there are established data sharing models in place, there should be no real material barriers. The fact that the data sits in different locations, inevitably individually attracting cost, can present some challenges to insurers, particularly those with legacy system issues. Ultimately, securing access to the data is often not the real issue, but using it effectively and efficiently in an operational environment. Whilst it is in the interests of every insurer to tackle fraud collaboratively, including sharing data, in some quarters, insurers who have invested heavily in their counter-fraud models will hold the view that they are maintaining a competitive advantage by not sharing data for fraud prevention purposes. The same applies to those suppliers and third parties who have invested in capturing fraud data and may be less than inclined to make the fruit of their labours and investment more widely available. Have you seen an increase in fraud this year? What types of fraud? Ghost broking is probably the stand-out fraudulent activity this year. Those involved are attacking the soft underbelly of the industry, leveraging the relative anonymity of the Internet and feeding off not only complicit, but reckless and naive consumers. What isn t abundantly clear is just how widespread the activity is or how many ghost brokers are operating, but all the indicators are that it is proving troublesome for the wider industry to successfully identify and respond to. When you also factor in claims made on ghost broker policies, the impact of this type of fraud extends further than the initial lost premium. The industry needs to get a much better handle on its ghost broking exposure with the ABI arguably best placed to do this working in conjunction with the IFB. At 1st Central we have devoted meaningful attention to preventing ghost brokers from securing cover. Our defences against ghost broking are holistic, which is our approach to fraud in general. Which insurance lines are seeing greater instances of fraud? With the industry generally continually evolving its counter fraud defences, it s difficult to accurately determine which lines are experiencing greater instances of fraud. However, given the widespread use by police forces of ANPR and implementation of Continuous Insurance Enforcement, owning or driving an uninsured vehicle is now a high-risk strategy in terms of being detected. Interwoven with the challenging financial climate and motor insurance being a compulsory purchase, this arguably will have had a bearing on the behaviour of certain consumers in how they apply for and secure motor cover, including how truthful and accurate they are when doing so. Application fraud, which extends to ghost broking, remains the industry s Achilles heel. Insurers who have not yet fully embraced fraud prevention at point of sale will only find this is to their disadvantage in the immediate and longer term. Not having in place robust and smart gate-keeping at the front-end will inevitably attract the dishonest element who are always looking for the weakest link, at a cost to the insurers targeted. How frequently do fraud cases go to prosecution and how could prosecution rates be increased? At 1st Central we view prosecutions as a component of our counter-fraud strategy. We were one of the early insurer referrers of fraud cases to IFED, and two of the first five successful fraud convictions for IFED relate to 1st Central matters. We continue to refer new cases to IFED each month and view the role of IFED as integral to the industry fight against fraud. IFED is quickly making its mark in terms of arrests of insurance fraudsters, which is very positive for the industry. Increasing the number of prosecutions will be dictated by the capacity of IFED and of course insurers continuing to refer cases. 18 Insurance fraud 2012: On the rise, opportunistic and online

Interview with Peter Oakes, Head of Fraud, Hill Dickinson Is it common practice for fraud investigators to use social media? Social media is a valuable tool in the armoury of a fraud investigator. It isn t a silver bullet, but it is accepted by the courts and combined with other investigative techniques, it supports the investigator in compiling robust evidence to enable a claim to be repudiated. Is there scope for using social media to support fraud prevention at policy inception? It is difficult to see at present how social media tools can be used at policy inception stage, given immediate access and processing of this data would be problematic; although a range of fraud checks pre-policy are becoming more prevalent. How might social media fit in with the use of geography and Ordnance Survey data? Improved smartphone and tablet technology, and increased ownership of mobile devices, means that people are sharing more and more information in the public domain, which increasingly includes their location. Such evidence can highlight anomalies in information provided during the claims process, which can be powerful in defending fraud including staged/ contrived accidents. It is important to be able to establish whether two people, who aren t meant to be known to each other, are linked and investigations conducted via social media platforms are regularly successful in verifying associations. Increased availability of geographic data will assist fraud investigations and in some cases could be crucial. Are you seeing a growing use of social media analytics software to combat fraud? Social media analytics software is available to assist investigators; at Hill Dickinson we use our in-house analytics systems to trawl the social media platforms. Are there any privacy issues involved in using social media data to combat insurance fraud? It is essential that investigators comply with UK legislation regarding privacy and data protection. Social media platforms arguably represent a grey area by nature of the fact that they are public domain and individuals manage their own privacy settings. It is important that investigators ensure they are compliant with the terms and conditions of the site they are using. IFIG background Insurance Fraud Investigators Group (IFIG) is a non-profit making members organisation dedicated to the detection and prevention of insurance fraud. On 1 October 2008, IFIG became one of the first organisations in the UK to be acknowledged by the Government as a Specified Anti-Fraud Organisation (SAFO) under the Serious Crime Act 2007. Only six anti-fraud organisations have been awarded this status, which allows public bodies to share intelligence with IFIG to prevent or detect fraud in general and insurance fraud in particular. IFIG is supportive of collective industry initiatives: it is working closely with the City of London Insurance Fraud Enforcement Department (IFED), a specialist police unit established in January 2012 that is dedicated to tackling insurance fraud. IFIG also works with organisations such as the Insurance Fraud Bureau (IFB) and welcomes the Insurance Fraud Register (IFR) an industry initiative that will deliver the UK s first register of known fraudsters across the industry. IFIG s website, www.ifig.org is designed to encourage anyone to report insurance fraud that has occurred or may occur within the UK. IFIG Chairman David Phillips explains: We know fraudsters involve themselves in many aspects of criminality and we are very keen to disrupt them by working closely with organisations across the public and private sectors. IFIG now has over 320 company members covering the vast majority of the insurance industry and insurance fraud investigators. The SAFO status awarded to IFIG by the Home Office in 2008 has enabled us to build upon our relationships with the public sector and law-enforcement agencies and has supported our key aim of working collaboratively to detect, disrupt and prevent insurance fraud. Insurance fraud 2012: On the rise, opportunistic and online 19

Insurance Fraud Investigators Group (IFIG) is a non-profit making members organisation dedicated to the detection and prevention of insurance fraud. On 1 October 2008, IFIG became one of the first organisations in the UK to be acknowledged by the Government as a Specified Anti-Fraud Organisation (SAFO) under the Serious Crime Act 2007. IFIG s website, www.ifig.org, is designed to encourage anyone to report insurance fraud that has occurred, or may occur within the UK. Marketforce mobilises knowledge in business across the key industry sectors of financial services, utilities, transport and logistics, media and entertainment, public sector and outsourcing. With over 20 years experience of creating forward-thinking, senior-level conferences, interactive networking environments and analytical, research-based reports, Marketforce provides business communities with the insight they need to drive industry forward. For further information on Marketforce conferences, please visit www.marketforce.eu.com With a continued increase in fraud and squeezed margins, the insurance industry is under greater pressure to underwrite more profitably. Ordnance Survey location intelligence can help you do exactly that. You can identify patterns by analysing data at individual address level to uncover relationships between seemingly-unrelated third parties. We see the detail, so you see the bigger picture. www.seethedetail.co.uk/insurancefraud Image on front cover and page 16 Commission Air / Alamy Images on pages 2, 4, 6 and 8 Shutterstock.com Ordnance Survey and the OS Symbol are registered trademarks of Ordnance Survey, the national mapping agency of Great Britain. Ordnance Survey acknowledges all other trademarks. D09785 0812 20 Insurance fraud 2012: On the rise, opportunistic and online