Roundtable: Commercial motor – applying the brakes to the ongoing threat of fraud

While motor fraud has been widely reported in the personal lines space, criminals are now increasingly turning to commercial targets.

James Burge, head of counter fraud at Allianz Insurance, explained: “We do very well in the personal lines world. The industry and market have concentrated heavily here for a long time. Now, we need to see that across the whole industry. That fraudster will always look for the path of least resistance and know that commercial is maybe a bit underdeveloped and will attack.”

Fraud and validation strategy lead at Zurich Insurance, Christine Ryan, agreed saying: “My background is from the personal lines side. We relied heavily on data. We have the No Claims Discount database, we have got the Claims and Underwriting Exchange, and we have got ID validation. All of those are so much easier in a personal lines space. So, it is a more significant challenge on the commercial side.

“From motor, it is easier to set up a commercial property because the level of validation and replication on a motor policy is much, much lower than personal lines, so they go down the path of least resistance.”

So, can the measures adopted to prevent personal lines fraud be implemented in commercial motor insurance?

Differences

Head of counter fraud and crime at RSA Adele Sumner said: “I think detecting commercial lines fraud versus personal lines fraud is very different. And the processes, procedures, and data involved are different too. Therefore, you need two very different approaches.

“You can also have a well-established business; in a commercial environment, that business is sold, and the risk is materially different. Criminals use this to enter the market. They can trade off a good brand and a long-established policy. It is those threats that we need to share a bit more.”

Burge added: “The challenge we face as commercial insurers is a different mix of customers when dealing with intermediaries and brokers.

“If you think about the motor trade sector, the whole point is getting vehicles on the motor insurance database as quickly as possible after the policy’s inception because those vehicles are being used for other means. And, once a vehicle is on the MID, they will not get stopped by the police and don’t want to claim.

“We talk about claims fraud, but it is not what they want to do. Motor trade is all about getting those vehicles on the MID so they can potentially sell those certificates elsewhere.”

Broker role

Mike Wall, head of non-standard insurance Markerstudy, said brokers would be critical to mitigating risk. He said: “I don’t think any insurer will continue to support a broker unless the results are where they need to be.

“The quality of the brokers who present themselves to insurers have to be able to back up what they say and come up with the things they believe will protect the insurer. I did ask if the performance of commercial lines is outstripping personal lines when it comes to fraud, and the answer I got was ‘no’. It isn’t at the minute.

We have layers of human intervention, and if something is presented to an underwriter, they
will probably challenge something they have spotted.”

Mike Wall, Markerstudy

“We have layers of human intervention, and if something is presented to an underwriter, they will probably challenge something they have spotted.”

With fraud on the rise, would commercial motor insurers be wise to allocate additional resources to detecting suspect applications, and what impact would this have?

Commercial policy & fraud manager at Axa, Craig Conlon, said many insurers don’t really know the scale of the problem because they haven’t investigated it.

He said: “It’s not just an educational piece for the brokers. It is an educational piece for the wider industry – because there are insurers out there who maybe have neglected commercial fraud. They don’t see it as a problem.

“The industry doesn’t really understand the indications in terms of financials to the industry. It is tough to put in a business case that we need a team of six, and X amount of money, and your return on investment will be X amount. The industry doesn’t know what that saving is.”

Putting in controls

Sumner added: “This isn’t a matter of resource at all, nor is it a matter of data. We have a real issue with becoming obsessed with data. You need to expose what fraudsters are doing first and then look at the data. You put your controls in once you have talked about what they are doing, and, now, there is definitely some work to be done in that area.

We have a real issue with becoming obsessed with data. You need to expose what fraudsters are doing first and then look at the data. You put your controls in once you have talked about what they are doing.” 

Adele Sumner, RSA

“Resource is a bit of a red herring. There is an education piece around just thinking about it first. Awareness is massive here because most people think they are doing business with a genuine person, whether an insurer or a broker.

Conlon agreed, saying: “Criminals are always three steps ahead. The only way we can keep up to speed with them is to share what we find with each other.”

Some commercial motor insurance policies are secured by e-trading. Is this method more susceptible to fraud as it relies on customers declaring information such as criminal convictions?

David Scott, a sales consultancy manager at Crif Decision Solutions, asked whether e-trading to purchase a policy makes it easier to lie.

Convictions

Wall said Markerstudy ran an exercise on criminal convictions in the personal lines space. He said: “We found that someone could put down that they have a criminal conviction, and, on price comparison sites, there is no follow-up to what that person actually did.

“They are taking on that risk without knowing the criminal conviction. This is in personal lines, and it is going on now. The criminal conviction could be quite important. It could be major fraud. But there is no step two.”

Ryan added that most general insurers would decline this rather than go down the route of validating a criminal conviction. She said: “It is down to each insurer and their footprint.”

Conlon agreed, saying: “It is down to each insurer’s appetite, and every insurer differs as to what is acceptable and what isn’t.

“There are so many dependencies. If you had a minor criminal conviction 12 months ago, how would that impact the risk? Probably not much. You have to take a view – and I don’t think you could standardise it.”

Data enrichment

Burge said: “A broker in the e-trading commercial space enters a certain amount of information about risk, and it is down to the insurer to enrich that data as much as they want to say whether that risk is acceptable within their criteria. If they are going to do it, they will do it. It goes to the route of does that person exist. If they do, then validate.”

There are so many dependencies. If you had a minor criminal conviction 12 months ago, how would that impact the risk? Probably not much. You have to take a view – and I don’t think you could standardise it.” 

Craig Conlon, Axa

“They would make one of their employees a director and put themselves as a named driver. You must investigate these policies. There is a skill to investigating this.”

Sumner said the key to this was focusing on the fraudster: “It’s the fraudster who drives our strategies. It’s about the industry sharing those trends and keeping up with each other, not just between ourselves but also commercial lines brokers. We have to come together and close those gaps, and I’m not sure whether we are sharing the trends around the market enough to be able to answer that directly.”

Sharing information across the industry is critical to combatting fraud, but what would be the best way to do this?

Hayley Comper, sales consultant at Crif Decision Solutions, asked whether it would be beneficial to the industry for brokers to have a database to input new risks at the application stage that could be flagged up with another insurer or broker.

Wall said: “It would save a lot of wasted time as you would be presenting something, and then someone comes back and says that’s not the way it is. When collecting the information, you realise the risk isn’t what you originally thought. If you knew that before you started, it would be so much easier. But you will put in the wrong information if you are a fraudster.”

Centralised database

Sumner added that any centralised database “would need an awful lot of thinking and an awful lot of support”.

She said: “I’m not convinced it would work in detecting fraud. The types of fraud I’m seeing now are generated by hardened criminals using insurance policies to mask their real identities. I’m not entirely convinced that a centralised database would work.”

Conlon added: “Hardened criminals, organised crime – a database would not protect or help you in any way. These people are sat behind genuine businesses that would tick every box if you spent three weeks validating. Organised crime and motor is an unmanaged risk. You can’t manage it. You can’t, by and large, detect it, and you can’t prevent it.”

However, not all commercial motor space fraud is committed by hardened criminals and organised gangs. Thanks to the cost-of-living crisis, opportunistic fraud is on the rise.

Opportunistic fraud

Conlon said Axa saw more opportunistic fraud and expected it to increase.

He said: “The lower-level motor trader may be led to conduct a bit of ghost broking because they can’t afford to pay for a policy. Given the current climate, people may be driven more into the criminal lifestyle, so we will definitely see an increase.”

Burge added: “We have seen examples of businesses struggling and making some wrong decisions. You need to understand why they are doing this. After all, they are making deplorable decisions in their business because they think it is the only way out.”

We have seen examples of businesses struggling and making some wrong decisions. After all, they are making deplorable decisions in their business because they think it is the only way out.” 

James Burge, Allianz

Sumner argued that economic factors always encourage people to get involved in fraud. She said: “Getting involved in a fraudulent insurance claim is not the answer as it could have all sorts of long-term effects in terms of getting insurance in future.”

Ryan said that the Insurance Fraud Bureau recently published some information on ghost broking.

She added: “As individual insurers writing to customers when we are concerned about something, we make it very clear what the consequences are. You would have to get all insurers to agree on the content if it is to be an industry-wide communication, which would make sense, but every insurer does their own thing.”

Burge said the message needed to get through to the right people as brokers are having those physical conversations with the clients. He added: “We need to talk about this more. IFB has issued its advice on ghost broking but is it reaching the right people? Is it getting out there? Probably not. We are pushing it as much as we can from industry and from ourselves. We make a song and dance when we have cases like this to raise awareness.”

Wall concluded: “I think the people we are trying to target at the top end are not bothered. I believe we must be careful that we don’t scare good people to death. It would need a statement to say that this database or this collective has been created with all the insurers now involved.” 

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