Fraud Spotlight: Insurers face ‘cat-and-mouse’ with fraudsters

There has been a marked increase in opportunistic claims fraud, according to the Insurance Post Fraud Survey 2024.

The survey of insurance fraud leaders, which was sponsored by LexisNexis Risk Solutions, found that more than 83% of respondents had reported that this type of fraud was on the rise.

This was second only to professional or organised claims fraud (52%) and criminal activity at the application stage (33%).

However, identity fraud made a leap from sixth place last year to become the fourth largest area where fraud is rising.

Head of fraud at Ageas Fiona Reeve said that following a significant reduction in activity during the Covid restrictions, there is now a noticeable increase in activity by organised criminals, both in application fraud and claims fraud.

She said: “In turn, this activity has increased both identity theft and the use of synthetic identities.”

Kat Cunningham, senior development manager at Aviva, added that the insurer had seen a 25% increase in application and identity fraud, mostly in the broker space, across the first six months of 2024, compared with 2023.

She said: “As a result, Aviva has embarked upon a programme of broker reviews to support and collaborate with our trading partners by sharing detection methods that we adopt and reviewing theirs.

Aviva has embarked upon a programme of broker reviews to support and collaborate with our trading partners by sharing detection methods that we adopt and reviewing theirs.

Kat Cunningham, senior development manager at Aviva

“Aviva recognises the importance of identifying potential fraud as early in our processes as possible as this has been a key transformation area for us over the last 12 months.”

Holistic view

When deploying technology to combat fraudsters, the point of claims was thought to be the most successful stage during the customer journey, second only to at the investigation stage.

Deploying technology at the point of inception or onboarding is now the third most successful stage, compared with fourth in last year’s survey. The fourth spot has been taken by point of quote, which was deemed the least successful point for deploying this technology in 2023.

Some insurers, however, are taking a more holistic approach.

Fiona Reeve said: “Our strategy is to combat fraud at the earliest possible point in the customer journey, as we recognise the importance of protecting our genuine customers from the cost of fraud, so we are not just focussed on claims fraud.

“As an industry, however, it is easier to connect with customers on the impact of claims fraud, as it’s simpler to understand, especially with the definitive financial impact that can be attributed to it. With application and ID fraud – not ID theft – it is more nuanced.”

Kat Cunningham said that there are a number of challenges for insurers in detecting various forms of application fraud.

She said: “Fraudulent documents have become more sophisticated and harder to spot. ‘Clean’ risks are being presented to insurers in order to avoid detection.

“We’re also seeing instances where the ghost broker is having the victim set up the fraudulent quote themselves. The victim then pays a fee directly to the ghost broker, before paying the insurer using their own card.”

QBE Europe’s special investigations unit claims manager, Charlotte Gray, added: “It comes down to investing in people, processes and technology. Team members need to be continually developed and upskilled.

“Processes need to evolve to respond to the fraudsters’ change in tactics. Processes need to be reviewed to ensure the genuine customer is at the heart of every decision made.

“Consideration also needs to be given to understand whether new technology is required. It’s also important to collaborate – both internally and within the industry. For example, for there to be a strong rapport among claims teams and for firms to work closely with other insurers and industry bodies.”

Tech priorities

When asked what data or technology they would prioritise for investment, access to broader or shared data once more was the top choice among survey respondents.

However, photographic recognition and analysis technology leapfrogged from sixth position in 2023, to second place in this year’s survey, perhaps indicative of the rise in identity fraud and the prevalence of ‘deepfakes’.

Market-wide prior claims data, social media usage and predictive modelling made up the rest of this year’s top five.

Fiona Reeve said that “the key is the intelligent use of data”.

She said: “Ageas has invested heavily in data science expertise to support our monitoring and understanding of customer behaviours at each point in the journey, and we have found that we can identify those who fall outside this pattern and need further investigation.

“Firms can’t look at these events in isolation – they need to follow the whole life cycle.”

Operational challenges

Difficulties obtaining information from external sources, such as law enforcement and public records was named as the number one operational challenge when implementing an effective strategy to combat fraudsters.

This was closely followed by problems in keeping up with evolving fraud schemes and adapting detection methods. Accessing and integrating data from disparate internal systems, lack of co-ordination with other insurers and outdated technology infrastructure were all named as other factors.

Kat Cunningham said: “Technology can be used to combat these tactics, but it’s a cat and mouse game: the more sophisticated we become in detection and prevention, the more sophisticated the [criminals] become at avoiding it.

“The challenge we face is that fraudsters have no bounds as to how they operate. They can exploit technology however they wish – such as setting up fake accounts on social media pretending to be a legitimate broker.”

Furthermore, the need to drive deterrence through “robust sanctions” following investigation was also identified as an issue by those responding to the survey.

Investment on the rise

The results also showed that around two-fifths of respondent firms had increased their counter-fraud budget by between 10 and 25% in the past year. However, while insurers are, on average, spending more money on counter-fraud measures, the survey found that firms are not necessarily seeking a return on their investment.

Charlotte Gray said she was pleasantly surprised with the aspirations of the technology suppliers she met with, during a recent review.

She said: “I don’t think a one-size-fits-all approach can apply to each insurer. However, there are advancements in the tech offering and I am excited to see what happens in the next few years.”

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