The Digilog Fraud Supper Club held its inaugural meeting at Home Grown in London on Wednesday 19th April, 2023. The main purpose of this meeting was to discuss issues which continue to arise following the downturn in the UK’s economic environment.
There is anecdotal evidence to suggest that when financial pressure is put on businesses and households due to increased inflation and rising rates from the loan markets – such as mortgages – there is a corresponding increase in fraudulent or inflated claims made on the insurance industry.
Insurers, MGAs and Brokers alike are at the forefront of good quality insurance arrangements, and the UK regulator is looking over our shoulders ensuring that we can, wherever possible, identify and eradicate fraudulent claims. However, as the meeting explored, fraud could be present at the inception of a policy and therefore, those applications need to be reviewed with caution.
The meeting commenced with a presentation by Martin Stockdale, a partner at Kennedy’s law firm. Martin is recognised as a specialist within the Third Party fraud environment, but he also comes with the advantage of First Party claims knowledge too. During his discussion, Martin spoke about the ‘Cost of Living’ environment where consumers see the fall in real income, increased unemployment and the emergence of the skills gap. All of this would have a major impact on access to markets.
The cost of living crisis is pervasive; we are all impacted in one way or another. There is an evident direct correlation when people are under pressure – financially more so than anything else – creating a greater inclination to commit fraud. Whilst the UK was recovering from post-pandemic influence, there was an increased awareness of fraud identified by the major insurance contributors. Plus, the fall in GDP also resulted in a potential increase in ‘opportunistic’ fraud. Martin outlined the drop in casualty claims during the pandemic, but this was increasing and there were also signs that post-pandemic claims could be greater than they were at pre-pandemic levels.
Some of the major influencers of fraudulent claims were identified as ‘enablers’. ‘Enablers’ are people or firms within a claim chain with the ability to inflate or increase a claim, often beyond the knowledge of the actual claimant. As a result, ‘Cash for Crash’ was discussed, as was medical claims from travellers.
However, the meeting had some concerns in relation to the follow-up of the 2016 Insurance task force, which seems to have stalled.
Lior Koskas, CEO of Digilog, started his discussion with a short demonstration of DiVA – Digital intelligence Voice Analysis. Whilst this type of system is often used at the claims FNOL stage, there have been great strides in improving the technology to enable legitimate, bonefide claims to be fast tracked to settlement – thus ensuring the policyholder’s claims journey was as painless as possible. This validation of the claim assisted the capacity provider in a non-adversarial process and allowed them to concentrate on those calls which did not meet this criteria.
However, the carrier’s commercial decision to pay a small valued claim, as opposed to challenging the claimant, was never far from mind. Members around the table were also aware that some carriers are reluctant to challenge a claim due to prospective reputational damage.
Some members were aware that the level of evidence could be seen as a barrier to a claim, and it was agreed that this was not an acceptable situation. Any claims payment would impact the overall premium. Some motor commentators had considered that approximately £40 per motor policy is added for fraudulent claims, but this was disputed as it could be in relation to uninsured driving. However, that in itself should or could be considered a form of fraud.
Exaggeration of the claim was also raised, with the comment that carriers would seek to reduce the submitted claim, resulting in policyholders increasing their claim to ensure they got their just deserves. Although there is a difference between conscious and unconscious exaggeration, where people are constantly in conversation with medical representatives, encouraging a self-fulfilling prophecy with regards to the extent of personal injury.
This then raised the issue of ‘Fraudulent Dishonesty’ claims. Martin Stockdale outlined two specific scenarios of what did and did not constitute Fraudulent Dishonesty.
With regards to the perception of fraud and the position of each company, not many seek criminal convictions once fraud has been identified. It costs money to run these cases, and every penny put into challenging, fighting and investigating it is not guaranteed to see a return, which has an extremely detrimental impact on loss ratios. There is not a finite pot of money. It’s also not solely hinging on costs, but a small window of time in which to resolve, and no company wishes to embark on a 4-year litigation.
Carriers did come in for some criticism, especially where they asked less qualified claims representatives (adjusters) to visit claimants. Such adjusters could struggle to work with the customer, especially where a site visit was required.
Members reviewed the continued increase of data capture, use of AI, fraud awareness and advanced systems all designed to combat fraud. But more often than not, fraudsters seem to be ahead on fraudulent claims and new types of fraud were being discovered on near enough a daily basis. This was questioned, and the market’s reluctance to share data and anti-fraud measures could itself be seen as a barrier for better fraud controls.
The meeting also heard from Jim Laird, Intelligent Voice, about speech and text analytical tools where the spoken word and the written word were assessed for anomalies. Jim provided example phrases such as “the car” opposed to “my car”.
The in-depth analysis of the words captured during DiVA also looked at “hedging my bets” responses. Where questions are not answered fully and completely, a red flag would be produced. Whilst this was not a direct indication of a potential fraud or intent to deceive, it did require further review by a claims person. In a nutshell, members were encouraged to ‘listen smarter, pay faster’.
To conclude the session, it was noted how in the modern world we all needed to be cognizant of callers with voice disabilities or with ethnic backgrounds. Lior was quick to assure members that voice recognition was resilient and took into consideration these types of challenges.
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