Who wants to be a fraudster?

The recent high-profile court case involving Charles Ingram, the former army major convicted of cheating on Who Wants To Be A Millionaire?, highlighted what the insurance industry has known for a long time - insurance fraud is a major problem for insurers and honest customers alike.

A certain level of fraudulent activity is expected, with some customers seeing insurers as fair game. Arguing that policyholders pay the price for fraud through higher insurance premiums has little or no deterrent effect on these people.

While there is no such thing as an average fraudster, research by the Association of British Insurers shows that many do not set out to con their insurer - they are opportunists who justify their behaviour by arguing they are getting back what they should receive. Some believe this is the way the industry works, arguing that they deserve some return after years of paying expensive premiums or covering the costs of excesses.

The industry must combat this by explaining how insurance works and providing the best possible service. Managing policyholders' expectations at point of claim and providing good service can reduce the potential for fraud in the future.

The insurance industry is not the only sector hit by dishonest customers and the ABI's research suggests insurance fraud is part of a wider problem with the public's perception of dishonesty. For many, committing fraud equates to speeding - it is wrong but worth a try because few get caught.

Changing this attitude is easier said than done and a sea change in these attitudes would be necessary to reduce fraud. The ABI's research highlights widespread public ambivalence and uncertainty about which crimes are 'acceptable'.

For example, nearly two-thirds of people would not rule out deliberately taking too much change from a shop, and 31% are tempted to shoplift. There is a parallel here with insurance fraud - in the eyes of the perpetrators the victims are large, profit-making concerns that will not miss a small amount of natural wastage.

However, these losses have to be recouped, whether through increased prices in shops or higher insurance premiums. There is no such thing as a victimless crime and ultimately customers pay the price. This fact seems lost on the public and 30% of those surveyed by the ABI believed the cost of insurance fraud is either covered by insurance companies out of their profits or borne by shareholders.

Failure to meet genuine policyholders' expectations at the claims handling stage tempts some to make fraudulent claims in future. Some 7% of respondents in the ABI's research admitted making a fraudulent claim. Perhaps surprisingly, these fraudsters were typically male, married, university-educated, in full-time employment, highly insured and owned their own homes. These policyholders are normally viewed as insurers' best customers.

Reducing fraud must remain a priority for all sectors of the industry.

Tackling the problem should be split into two areas. Firstly, customer service must reach the highest possible levels, particularly in claims handling and communications. Brokers can play an important role in this process, given their interface with clients.

Secondly, insurers, brokers and other members of the industry must work together to identify more fraud. For example, the ABI is currently working on an industry-wide, electronic anti-fraud system. The ABI is also working with the Association of Chief Police Officers to see how suspected fraud cases can be presented to maximise the chances of a criminal prosecution.

Much more needs to be done. Through its anti-fraud committee, the ABI hopes to improve the industry's ability to prevent and detect fraud. Brokers should get involved.