ANNEX B
ABI commitment to combatting insurance fraud
| Tackling Fraud
· The insurance industry invests around £200m pa in preventing, detecting and enforcing against the ongoing, increasing fraud problem.
· The recent renewal of the contract with the Insurance Fraud Enforcement Department until end 2017 takes the ABI's total investment in IFED to more than £20m.
· The Insurance Fraud Register- the first database of known insurance fraudsters - is now operational.
· The ABI has reached agreement in principle to share data with claimant lawyers to help tackle fraud.
· These initiatives -which complement the excellent work of the Insurance Fraud Bureau- demonstrate that the infrastructure and expertise are in place across the industry to combat fraud.
· The Government and Judiciary can play their part by creating a legislative and regulatory environment that supports insurers' efforts to bring fraudsters to justice. Raising the Small Claims Track limit would help to combat fraudulent injury claims and reduce motor premiums further.
· We main resolute in our goal to work in partnership to beat the fraudster and protect our honest customers.
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Given the political, media and consumer interest in the cost of
insurance, I am writing to provide an update on current key ABI
counter fraud initiatives given that insurance fraud is a key
unnecessary cost for insurers leading to higher premiums than
are necessary for consumers.
Background
Insurance fraud remains an ongoing, burgeoning problem. In 2013,
the amount of fraud detected by the insurance sector exceeded
£1 billion for the first time and it is estimated that at
least double that amount goes undetected each year. So fighting
insurance fraud remains a key strategic industry priority and
collectively the industry invests around £200 million a year
in preventing and detecting fraud.
The Insurance Fraud Enforcement Department
In the last three years, the insurance industry has intensified
efforts to combat fraud and protect its genuine customers. Since
its inception in January 2012, the Insurance Fraud Enforcement
Department (IFED), a bespoke unit housed within the City of London
Police, has made 462 arrests, secured 84 convictions in court,
and issued 139 cautions. It currently has around £29 million
of fraud under investigation.
IFED has also coordinated two national 'days of action'
in respect of 'ghost braking' and credit-hire fraud in which a
total of 47 people were arrested. But it isn't just about enforcement.
IFED takes every opportunity to use its high media profile to
raise awareness of insurance fraud as an issue impacting honest
customers that is not a victimless crime and to underpin the deterrent
message.
In September 2013, the ABI extended the remit of
IFED to cover the Lloyd's market. And in March the insurance industry
agreed to invest a further £11.7 million to extend the IFED
contract until the end of 2017 taking the industry's total investment
to more than £20 million. This increased funding, which will
provide for an additional investigative team, will enable IFED
to continue to lead the national response to insurance fraud,
bring more fraudsters to justice, recover and return more assets
to the victims of fraud and undertake more quarterly days of action.
Insurance Fraud Register
Another key initiative is the Insurance Fraud Register
(IFR), the insurance industry's first database of known fraudsters,
operated by the Insurance Fraud Bureau (IFB) on behalf of the
ABI. The IFR provides a visible deterrent that delivers tangible
consequences for fraudsters. Insurers represented on the lFR Steering
Board have started to load data to the IFR, and we are now rolling
out the register to the rest of the insurance market.
The IFR Steering Board spent considerable time developing
the governance framework and standard contractual arrangements
and has built a number of safeguards into the process. Above all,
the Board has ensured that the provisions regarding privacy and
security of data are robust and transparent.
Whiplash
There is still more to do to tackle the UK's whiplash
epidemic. Raising the Small Claims Track limit is vital to help
to combat fraudulent personal injury claims and reduce premiums
further; not increasing the limit was a missed opportunity to
introduce real meaningful reform.
We welcome the Government's intention to introduce
robust reform to the medico-legal reporting system, which has
an important role to play, but it should not be seen as the panacea
for delivering further reductions in car insurance premiums. Given
that there remains no objective test for whiplash, in addition
to the number of vested interests in the wider claims industry,
the impact of the Government's proposed reforms to tackle frivolous
and exaggerated claims may not be as great as first anticipated.
Sharing Data to Reduce Personal Injury Fraud
The insurance industry understands the benefits of
sharing data with claimant lawyers to help tackle fraudulent claims
and the Claims and Underwriting Exchange Personal Injury (CUE
PI) database has been identified as the best source of information
to be shared. There is now an agreement in principle to do so.
The ABI and the MIS have held a number of meetings with claimant
lawyer representatives in recent months to define how the data
will be shared in practice.
In the spirit of cooperation and maximising the benefits
of data sharing to combat fraud, insurers have requested that
claimant lawyers provide the referral source of the claimant to
the solicitor and whether the solicitor has declined to act for
the client on suspicion that the claim is fraudulent. This information
would support organisations such as the IFB and IFED in their
investigations into organised fraud networks. In addition, the
data could be shared with both the Solicitors Regulation Authority
and the Ministry of Justice to assist in identifying those Claims
Management Companies that refer a disproportionate number
of cases declined by solicitors on the suspicion of fraud.
Conclusion
These initiatives send strong signals of the industry's
ambition to reduce fraud and complement the excellent ongoing
work of the IFB which has spearheaded the fight against organised
insurance fraud since 2006, and is currently managing 109 investigations
worth in the region of £120 million, the vast majority of
which involve professional enablers.
The infrastructure and expertise are now in place
across the industry, and there should be no let-up in identifying,
deterring and enforcing against fraudulent activity.
The Government and the judiciary can play their part
too. Firstly, we require a legislative and regulatory environment
that supports, rather than stifles, insurers' legitimate efforts
to combat fraud. We are encouraged, for example, by the Law Commission
agreeing to take forward for further consideration the ABI's proposal
for a law reform project on personal injury fraud. Secondly, we
need the courts to promote deterrence. We are encouraged by growing
evidence that the judiciary is beginning to take a tougher stance,
handing down more, and stiffer, custodial sentences.
We remain resolute in our goal to beat the fraudster
and will continue to work in partnership with the Government,
regulators, consumer groups and those within the insurance sector
to take action to protect our honest customers.
Please feel free to contact me should you require
any further information in relation to the industry's efforts
to combat insurance fraud.
Yours sincerely
Otto Thoresen
Director General, ABI
John O'Roarke
Managing Director, General Insurance, LV=Chair, ABI
Financial Committee
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