News analysis: IFB’s three-year strategy wins financial backing from insurers

Fighting fraud has been ratcheted up a notch with the unveiling of the Insurance Fraud Bureau’s new three-year strategy. Insurers have agreed a 25% increase in the IFB’s budget, taking it to nearly £2.8m. This will enable it to double its staff immediately and then grow in line with its plan.

The IFB boost is a sign of wider fraud-busting activity by insurers. The new industry-funded police unit starts in earnest in January under the leadership of DCI David Wood; while the Insurance Fraud Register also goes live in 2012. The IFB will be the glue that binds these anti-fraud initiatives together. And the message is bad news for fraudsters.

Insurers have recently affirmed the value of the IFB’s work, according to chairman David Neave: “We went out and asked what the industry wanted, starting with a consultation exercise run by Deloitte. An online questionnaire was sent to all our contacts with a 60% response rate. Twenty CEOs across the market were interviewed, as well as those working in fraud detection and prevention.

“We recognised a disconnect exists between a CEO focused on the macro issues, such as the reputation of the industry, and the individual budget holder who needs to show value for money.”

Ringing endorsement
The result was a ringing endorsement of the IFB: 92% wanted it to expand to cover supply chain and application fraud and 82% wanted to receive services specific to postcodes and addresses. Some 77% wanted online training from the IFB, with 82% keen for classroom-based training. There was also strong support for the IFB to establish recognised standards defining insurance fraud across the industry, while the majority wanted it to continue concentrating on organised motor fraud.

Neave told Post this demand was a central issue.  “There’s still a lot more to get out of the system. If you can imagine a standard graph curve of fraud, at present we can identify all of it but are only tackling 15% to 20%. This will allow us to tackle 50%.”

IFB director Glen Marr added: “We look at the 20% that will give the biggest return. That means those with the highest likelihood of police or regulator take up. We focus on getting results. It’s not cherry picking, it’s risk analysis.

“We go into the industry data every week and then a human being questions the network to see if it is important. If we think we have something very strong, we will go to the police with the regulator. Sometimes the police interest is immediate; some [data] we work on for months to turn it into a case.”

That manpower will now be bolstered with the extra cash. Head of analytics, Kevin Reid, currently has only one analyst working for him. He will soon have three and eventually a fourth. The intelligence team, headed by Stephen Dalton, will grow from three to eight next year and to nine soon after. And the operations team, led by Ben Fletcher, will rise from nine to 19 and then to 20.

Staff will be split between London and Milton Keynes, with 13 based at the offices of the Association of British Insurers and the rest “half-an-hour away” in Milton Keynes.

Another big change will be in communications. The IFB has switched from using its external PR firm to sign up with the Motor Insurers’ Bureau, which will employ a full-time communications officer and recharge the position back to the IFB. In the past, the IFB admits it has been ill-prepared to handle spikes in its Cheatline public fraud reporting system that occur whenever it gets a mention in the media. By tying up with the MIB, it benefits from call-centre capacity and will train operators in taking fraud reports.

Magnet to the police
But the extra staff will mean taking on more work from all sources – insurers, informers within criminal networks, the police and regulators, as well as from public tip-offs. Marr said: “We have dealt with 50 of the 51 police forces; we are like a magnet to the police and regulators. The police come to us with information on drug dealers and we can help with their enquiries. We are also working closely with the Solicitors Regulation Authority and Ministry of Justice – and have excellent relationships with them.”

The current target is the professional enabler – claims management firms that invent or inflate cases or doctors who provide false or exaggerated medical reports to back up rogue claims. “Sometimes an insurer will come to us with a small concern, sometimes they come with a good case but looking for a wider industry perspective,” Marr said. And despite its prime focus on motor fraud, the IFB database can help with other scenarios.

For example, Ace Europe had pretty much cracked its case against Anthony McErlean for faking his own death but could not locate him. It approached the IFB and the database identified him within seven minutes, enabling the police to be called. McErlean was sentenced to six years imprisonment earlier this month. 

Future expansion plans could see this kind of co-operation on other frauds becoming standard. The IFB could quickly move into other areas of insurance fraud, such as travel insurance, if insurers start to use a system similar to the Claims and Underwriting Exchange, which is the basis of the IFB’s business model. But for now, it will concentrate on motor, as demanded by its insurance clients.

With the IFB already receiving data from 97% of UK motor insurers by market share, there is little room for picking up more members, although a few niche motor insurers are in discussions with the IFB about signing up. But it did enlist its first broker member this year when Swinton came on board at the beginning of October. Other brokers – those big enough to employ a dedicated anti-fraud person — are reportedly dotting the i’s and crossing the t’s too. And the IFB is to work with the British Insurance Brokers’ Association next year to see how smaller brokers can become involved and share data.

Unique knowledge
The bureau has also upgraded its analytical software, NetReveal, and had software firm Detica build a web portal so users can access on-demand fraud risk scoring and receive intelligence reports from anywhere in the country, helping prevent fraud not just spot it afterwards.

If there’s one problem with the three-year plan it could be finding and retaining the right staff. Marr, who is himself leaving after just over a year in the director’s role, said: “One of our challenges is keeping people. Our staff are in a unique role and have unique knowledge. They are attractive to poach.”

Neave is undoubtedly proud of what the IFB has achieved. “We met with the Financial Services Authority a couple of weeks ago. It has limited resources, so looks to where it can best use them. They see general insurance as well
organised and not requiring money spent on it. If they thought insurers were simply trying to pass on the cost of fraud to customers they’d be rightly concerned.”

While Marr concluded: “We are substantially ahead of the banking sector. And the government is looking to replicate the IFB model for local authorities and government, to tackle benefits fraud.” The IFB certainly looks like money well spent.