CILA - The Chartered Institute of Loss Adjusters

Anti-Fraud SIG Conference Sessions

Introduction

The Anti-Fraud SIG Conference Sessions were introduced by John Freeman and John Baldock

Floods 2007

In June and July 2007, there were several periods of extreme rainfall which gave rise to widespread flooding in England and parts of Wales. We experienced the wettest May to July since 1766 when reliable records were first collected. Approximately 49,000 households and nearly 7,000 businesses were flooded. Major infrastructure such as transport links, schools, power and water supplies were disrupted. Flooding was caused by drains, river channels and flood defences being overwhelmed by the extreme flows of water. This often happened very quickly and in these circumstances it is difficult to predict where flooding will occur.

River flooding was extensive in the rivers Don, Severn and Thames and their tributaries. It would have been worse but for the protection given by our flood schemes. Effective warnings went directly to over 34,000 homes to help them cope with the floods. Some locations – notably on the river Severn between Tewkesbury and Gloucester, the Thames upstream of Oxford, and South Yorkshire suffered record breaking flood levels. Many flood defences were just overwhelmed.

Many people who were flooded suffered trauma or lost irreplaceable personal belongings. Some are still living in temporary accommodation. We must not forget the victims of the floods, including those who died as a result of them.

Fraud Opportunity

Whilst genuine victims of flooding, some claimants and even some suppliers still saw this event as an opportunity to make some additional cash by defrauding insurers.

Some fraudsters worked alone, others worked in organised groups. Some fraudsters colluded with some of the replacement goods and building network suppliers to have upgraded goods or to receive replacements for items they did not own or were not damaged or perhaps to increase repair specification to deal with historical maintenance issues.

You will hear instances of a dishwasher that was owned by one family in the street and used to display to several different loss adjusters working for different insurers all of who agreed to “replace” the item. This happened with every house in the street.

In other cases customers conspired with builders to refit new kitchens with top of the range units several grades higher than the damaged ones.

You will have been alerted to other styles of fraud. If you encountered fraud during the 2007 floods the questions we need to ask ourselves include:

  • How did you resolve the fraud issues?
  • Were the traditional reactive fraud indicators of benefit?
  • Did you find evidence of competing priorities i.e. Sound fraud detection vs. adverse publicity?
  • Would evidence based and predictive indicators assist?
  • How can adjusters share their concerns and learn from the experience?
  • Did the ABI telephone “cheat line” for whistleblowers work and was there sufficient publicity?

John Freeman and John Baldock

Presentations

The following presentations were then given:

Conclusion

Emerging Threats

We will now try to identify what we as an Anti Fraud SIG feel will be some of the emerging threats and challenges as adjusters. The CILA SIG has identified the following as emerging threats.

  • Proliferation of technology and expansion of trade zones introduces new threats. What we mean by this is:
    • Proliferation of insurance comparison and advice websites.
    • 70% of working adults have signed up to some form of internet banking (CPP Research 2007)
    • 67% with access to home PC have shopped on line.
    • 10% of staff admits to opening emails from unknown sources.
    • Phishing is up 200% from Q1 07 to Q1 08.
    • Increasing amounts of personal information widely available.
  • Economic pressure will increase temptation for otherwise honest customers to take advantage of weaknesses in our defences.
  • Increasing number of organised attacks and infiltration by organised crime rings beyond the usual motor arena.
  • Know your customer /policyholder (KYC). Are Insurers and are adjusters checking sufficiently?
  • As adjusters there is an increasing demand to understand our client’s needs around brand protection, consumer confidence and management of PR. The solution is to ensure any fraud response is proportionate to the risk exposure.
  • Clients need to also to understand that competitive advantage can still be gained when you combine strategic differentiation and operational superiority. This might include the informed decision to remove all fraud controls in a major event.
  • Adjusters must implement a top down and bottom up approach when it comes to fraud. As always communication is key.

John Beadle recently announcement concerning progress made by the IFB since it started in 2006.

There has been greater engagement with the police resulting in over 200 arrests of organised fraudsters, many yet to appear before Crown Courts. So far there have been 14 convictions and most have gone to prison.

Working with SOCA the assets of these individuals is being identified and seized. There are currently 28 ongoing Operations and many more arrests imminent. 4,543 separate documents have been supplied to the police. There are 11 ongoing police operations and the IFB currently operates 10 Confidential Informants.

The IFIG website has links to the IFB “Cheatline” number. After the first of the ITV Fiddles Cheats and Scams programmes there were over 100 calls to the Cheatline most via the IFIG web link. Many customers were simply incensed that neighbours and friends were defrauding Insurers and that they were paying for it via 5% of their premiums.

There is now increasing cooperation between interested parties who now hold quarterly meetings. They include:

ABI Financial Crime Committee (FCC)
ABI Anti Fraud Committee (AFC)
IFB
IFIG
Solicitors Regulatory Authority
Staged Motor Accident Reporting Group
FSA
National Fraud Strategic Authority

The IFB will continue its focus on staged motor accidents but it will also further share intelligence with identified appropriate parties on non motor matters and hope to diversify its activities into Commercial Motor, Property, Travel, Creditor, Life Insurance and other products as resources permit.

John McKenzie from the ABI Financial Crime Committee where he has responsibility for Statistics reported evidence from the credit crunch already biting during 2008 The relevant statistics are:

  • Inflation up 5%
  • House Prices fall 10% over last 12 months
  • Record Levels of Personal debt
  • Unemployment Increasing
  • Energy Bills up by 44% affecting 4.5million people

The ABI will shortly be publishing fraud stats in 2007. What we can tell you is that fraud is running at £557M with over 90,000 proven insurance frauds which represents a 30% increase between 2006 and 2007

Of the £557M detected Insurance frauds:

  • Motor represented 47%
  • Property at 20%
  • Liability 30%
  • Travel and others represent the balance. It is interesting to note that AXA has noted an 83% increase in Travel Fraud over the last 12 months, clearly a growth area.

All of the statistics that we have just given you confirm that in loss adjusting and general claims management the backdrop of increasing fraud creates ever increasing demands for an effective range of solutions.

Final conference Message

We would like to leave you with 3 Key messages from the CILA AF SIG:

  1. Fraud management can be one of the most entrepreneurial areas of our business i.e. you (fellow investigators) can make a difference
  2. Good fraud strategies are designed to deliver real value as well as meeting regulatory and social obligations
  3. Organisational awareness and appreciation of the value of counter fraud measures and specialist claims investigation can be the most difficult to resolve, but remains without doubt the most effective component to achieve.

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