Recent Initiatives in the Prevention and Detection of Insurance Fraud
| Published date | 01 January 1997 |
| DOI | https://doi.org/10.1108/eb025784 |
| Date | 01 January 1997 |
| Pages | 236-241 |
| Author | Michael I. Dixon |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 4 No. 3 — Insurance Fraud
INSURANCE FRAUD
Recent Initiatives in the Prevention and Detection
of Insurance Fraud
Michael
I.
Dixon
The insurance industry both in the UK and abroad
uses a variety of measures to counter fraud. This
short paper, as well as examining these measures,
will report on the apparent success the industry is
having against fraudsters in the UK. In addition to
this some of the more noteworthy cases will be
reported upon in order to inform the reader of the
differing types of frauds which may be encoun-
tered.
The ABI's annual fraud survey1 in 1995
indi-
cated that recent anti-fraud initiatives in the UK
have met with success. The survey asked insurance
companies to estimate:
— their net written premiums for 1995;
— the percentage of claim payments that are
fraudulent;
—
a
percentage breakdown of the types of frauds
committed against them;
— the number of
all
claims paid out in 1995;
— the number of
attempted
fraudulent claims.
The survey reported that in comparison with the
previous year, the overall cost of fraudulent claims
had decreased by 2.5 per cent. However, the cost
of such claims were still a massive £585m for the
year 1995. Mark Bolcat, the ABI's Director
Gen-
eral,
pointed out that this figure is still too high.
He stated: 'the insurance industry is committed to
reducing it by weeding out fraudulent insurance
claims and encouraging prosecutions'.2
The survey also reported that claim inflation still
remains the most common type of
fraud.
The next
most common is misrepresentation at the proposal
stage. Despite this the overall cost of claims has
also been reduced. Creditor insurance showed the
highest number of frauds as a percentage of all
claims, as it is estimated that 8 per cent of all
claims in this area are fraudulent.
The results of the survey indicated that the
implementation of the Claims and Underwriting
Exchange (CUE), reported in Vol. 3, No. 2, has
reduced fraudulent claims. This success story will
be expanded upon in a later section.
COUNTERMEASURES
A previous paper by the author3 categorised those
measures which have been employed to counter
insurance fraud. This paper will re-examine these
categories and comment upon the degree of suc-
cess such measures have met with in the UK.
The countermeasures which were identified
previously were:
— technological
—
legal
— national governmental intervention
— bureaux
— multi-agency.
In addition to this the author has identified
another strategy adopted by insurers to combat
claim inflation, the most common type of insur-
ance fraud. It is 'procedural'.
These measures are not mutually exclusive and
certain initiatives both in the USA and in the UK
have involved a multi-disciplined approach. Like-
wise certain countermeasures have met with vary-
ing levels of
success
with differing types of
fraud.
Technological
The last few years have seen an explosion in the
use of computers. The increased capacity of com-
puters to store large amounts of data and the
improved ability of relational databases has her-
alded successes against the fraudsters.
The use of computerised registers has been
growing.
One of these registers, the Claims and
Underwriting Exchange (CUE) is a database of all
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