by Kasi Johnston 10
Jul 2020
History has proven that times of economic crisis
traditionally see a huge increase in insurance fraud across most lines of
business, and with COVID-19 impacting lives on a level not seen in living
memory, fraudsters will be looking for new ways to cash in.
According to the Association of British
Insurers (ABI), the recession of 2008 saw a total of 107,200 false insurance
claims worth £730 million. This was a 17% increase compared to the previous
year, when fraudulent claims totalled £560 million.
“When the country becomes economically stressed,
so do people. The lines between right and wrong are easily blurred,” said Ahmed
Esat, head of investigations at Davies Group.
“The need to raise cash as a business or private household may prove to be a
strong motivator for insurance fraud.”
While a great spike hasn’t manifested at this
point, Esat believes there will be heightened risk of fraud through to the end
of 2020 and well into 2021 as we ease out of lockdown. All industry
professionals involved in claims handling will need to be aware of potentially
fraudulent activity and ensure that their counter-fraud antennae is switched on
and applied at all times. However, Esat says proportionality is important. Most
claims will be genuine and counter-fraud mechanisms need to work seamlessly
with expedient claims handling.
Domestic property claims
“Some opportunists may stage insurance claims completely while others may be tempted to take advantage of genuine claims and exaggerate their losses in the hope that claims handlers will not have time to scrutinise claims as thoroughly because of distractions, or because insurers fear adverse publicity,” said Esat.
“Some opportunists may stage insurance claims completely while others may be tempted to take advantage of genuine claims and exaggerate their losses in the hope that claims handlers will not have time to scrutinise claims as thoroughly because of distractions, or because insurers fear adverse publicity,” said Esat.
With lockdown and social distancing measures
becoming increasingly relaxed as of late, Esat says it creates the potential
for dubious accidental loss claims, often for jewellery and personal effects of
substantial value. While the opportunity for fabricating such a loss during the
most restrictive stages of the lockdown was limited, the risk of fictitious
claims in this scenario is growing.
With schools closed and individuals being
furloughed or working from home, it also creates a perfect storm for accidents.
An increase in DIY projects during this period is also a linked factor.
Commercial property claims
Esat is also predicting a spike in fraudulent activity in the commercial space; a repeat of what happened post-recession in 2008.
Esat is also predicting a spike in fraudulent activity in the commercial space; a repeat of what happened post-recession in 2008.
“Businesses who have had pandemic-related
claims, such as business interruption, rejected may be tempted to respond by
staging or exaggerating claims in the same climate as the opportunists, but
driven by a sense of injustice. Scenarios include businesses reopening with
redundant or obsolete stock and machinery or misrepresenting their pre-pandemic
financial position,” Esat said.
Businesses may even go as far as to provide fabricated
documentation. Esat says that “due diligence in this regard is critical to
identifying suspicious claims. While asset rich, many businesses will be cash
deprived.”
Mitigating risk
Challenges presented by the COVID-19 pandemic include the inability to deploy an adjuster to a site. Where one might usually go into a home or business to deal with a claim, Esat says adjusters have increasingly relied on video technology - but phone or video interviews may fail to elicit the usual physical traits of a suspicious insured and lack the spontaneity of a usual meeting. These added challenges mean insurance professionals need to put extra effort into doing their due diligence and truly understand the profile of the individual, including potential motivators of fraud.
Challenges presented by the COVID-19 pandemic include the inability to deploy an adjuster to a site. Where one might usually go into a home or business to deal with a claim, Esat says adjusters have increasingly relied on video technology - but phone or video interviews may fail to elicit the usual physical traits of a suspicious insured and lack the spontaneity of a usual meeting. These added challenges mean insurance professionals need to put extra effort into doing their due diligence and truly understand the profile of the individual, including potential motivators of fraud.
“Look for behavioural indicators, for example,
if a policyholder is resistant to the claims validation process or applying an
unnecessary level of pressure for settlement,” says Esat. “They may rely on
social distancing restrictions to prevent insurers from fully validating or
investigating claims.”
Modern technology is increasingly a weapon
against fraudsters. At Davies Group,
Esat’s team of investigators use a tailored video interview platform which
facilitates screen sharing, discreet bookmarking and three-way interviews,
allowing investigators to operate efficiently and effectively throughout the
lockdown.
Social media is also a key element in the fight
against fraud, especially with increased activity during the lockdown, as
relevant business and personal information is easily accessible.
In addition, Esat represents Davies Group on a number of entities,
including the Chartered Institute of Loss Adjusters (CILA) Anti-Fraud Special
Interest Group (SIG) where members can discuss fraud matters of mutual interest
and COVID-19-related trends.
“Cross-industry collaboration and intelligence
sharing will be key to identifying and disrupting new fraud threats as early as
possible and to minimise the harm they cause,” said Esat.
Insurers have not been immune to the impact of
the coronavirus either and are even more vulnerable to fraud as offices were
fragmented into a work from home structure. The sharing of information, as well
as the normal checks, balances and controls, may be stretched without the
normal infrastructures in place, he added, but Davies Group continues to operate at
a high level to ensure the usual counter processes are adhered to through
engagement and collaboration with claims handlers and adjusters.
“Training plays a big role in ensuring that long
established fraud identification processes are followed and raising awareness
levels in regard to the threats posed by the COVID-19 pandemic and the
potential drivers and motivators arising from the impact on livelihoods,” he
said. “Remote training delivered through video technology, underpinned by case
discussions and reviews has replaced the inter office discussions of old.”
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