Better together

With the latest figures released by the Association of British Insurers estimating that the annual cost of insurance fraud has risen to £1.6bn, the issue remains a key industry challenge. The need to protect honest customers is paramount and the industry is fighting back successfully by having sophisticated fraud detection systems in place. The figures also show that over £1m in fraudulent claims is being uncovered and prevented every day - a threefold increase over 2003. However, fraudsters are becoming more sophisticated and new trends emerge continuously, so it is important we stay one step ahead.

Research undertaken in the last three months within the motor sector by fraud management firm Absolute CM showed an increase in incidences relating to:

- motor vehicles stolen

- finance in arrears

- arson

- increased theft of older vehicles

- motor theft by deception

- recovery cases involving drink driving

- illegal taking of vehicles following burglaries

- policies being taken out with stolen credit cards and false ID, and

- contrived motor accidents or 'slam-ons' as highlighted by the media

The industry recognises that working collaboratively is vital to combating fraud and can claim significant progress at a strategic and operational level. It is disappointing that the findings of a recent British Insurance Brokers' Association survey show that there remains deep mistrust between brokers and insurers in handling suspected fraudulent claims. The research suggests that insurers may well be bypassing brokers when dealing with suspicious claims because they feel they are obstructive when it comes to identifying fraudulent policyholders.

Meanwhile, brokers have concerns about the impact of fraud investigations on policyholder customer service, as it is aligned to the claims experience and intermediaries' reputations. In a highly competitive insurance market where customer loyalty is increasingly difficult to maintain and channel differentiation is reliant largely on customer service, this concern must be acknowledged and overcome. It is therefore great news that Biba and the ABI have set up a joint Working Party Group, comprising Biba-recommended brokers and ABI anti-fraud panel members to combat fraud proactively and improve the level of understanding between brokers and insurers.

At the claims shopfloor it is clear that more must be done to encourage a cohesive, joined-up approach between insurers and brokers where information is shared and processes are integrated to mutual benefit. Presenting and maintaining a united front deters fraudsters and assists with detecting and handling suspect claims at the earliest possible opportunity in the claims lifecycle.

The fraud solution can work effectively at the end of the chain where insurers and brokers work together to identify suspect claims. Cognitive interviewing is one technique that may be used as a fraud management device. It meets the needs of both insurer and broker, enabling a joined-up approach that can reduce claims spend in relation to fraud while potentially improving customer service to policyholders. This approach shields genuine policyholders from the additional costs of fraud, supports FSA guidelines and protects the bottom line for both brokers' and insurers' businesses. Significantly, the all-important reputation of both parties is enhanced. Policyholders place great value in the fact that they are protected from unnecessarily high premiums through the proactive pursuit of fraud, and the swift resolution of genuine claims is a powerful reputation booster.

Brokers are an invaluable link in the chain of information pertaining to the policyholder and have a key role to play in assisting with the right decisions being made at the very beginning of the cycle when a claim or policy is identified as suspect. It is succeeding in this area in particular that will help the industry reap the benefits of presenting a united front to the fraudsters.

- Gabrielle Stewart, Technical director, Absolute CM

WHAT IS COGNITIVE INTERVIEWING?

Cognitive interviewing practitioners harness conversation management techniques, using listening and questioning skills to extract pertinent information from the policyholder while encouraging memory recall before, during and after the event that led to the claim. Utilising this approach, honesty and lies can be identified rapidly and genuine policyholders fast-tracked through the claims process to an early resolution. Rapport is built with the claimant, and in the case of a genuine claim the policyholder has the opportunity to talk about their experience to a representative that takes the time to listen to the problems raised by their situation.

Where honesty cannot be detected, the practitioner should adhere to the FSA principles of treating the customer fairly and when pursuing fraudulent investigations. The methodology for gaining information at the very start of a claim, rather than way down the line when it then becomes flagged as high-risk, complements best practice and treating customers fairly guidelines.