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Some potential solutions for the Insurance Fraud Taskforce

When the then Secretary of State for Justice Chris Grayling announced late last year that the government was establishing an Insurance Fraud Taskforce and also that he hoped the Taskforce would conclude their work by the end of 2015, there was a concern that the outcome of the General Election might derail the Taskforce’s work; the last coalition government had been one that the insurance industry was able to do business with and the following government may have been less committed to the work of the Taskforce.

Whilst the Conservatives were elected on 8 May, Mr Grayling was not successful at holding onto his position as Secretary of State and we now have a new Justice Secretary in the form of Michael Gove, but it is reasonable to assume that the Taskforce will continue with its task of identifying and seeking to remedy the problem of insurance fraud. Its ultimate goal is to produce final recommendations before the end of this year.

Promising beginnings

The Taskforce produced an interim report in March, which set out its early conclusions and the key areas that the Taskforce believed should be its focus. To aid the Taskforce in completing its work, at the same time as it released the interim report, the Taskforce also published a series of questions and invited responses.

Over the last two months the taskforce has held a number of stakeholder roundtable events which DWF along with others in the industry attended. At the last of those meetings, the group were asked to focus on a number of what were perceived to be the key questions raised by the Taskforce in their document and we have now had an opportunity to more fully address these in our formal response submitted at this stage of the process.

The key questions posed by the Taskforce at the last roundtable were:

  • What trends in insurance fraud should the Taskforce be aware of?

  • What practices by those involved in the claims process should the Taskforce target?

  • What forms of communications encourage fraudulent claims?

  • Do the actions of any party involved in the underwriting or claims process encourage the perception that insurance fraud is justifiable?

  • How could engagement with consumers & consumer education be improved to reduce insurance fraud?

  • What more can insurers do to challenge potential fraudsters and increase deterrents in the claims process without damaging the customer experience?

  • Is fraud data being adequately used and, if not, why not?

Missed opportunities

Over the last six months or so a number of reforms have been implemented in whiplash claims, mainly aimed at securing the independence of the medico-legal expert reporting in those claims. In addition, the askCUEPI previous claims search becomes mandatory for all whiplash claims that are intimated to the Portal from 1 June and is a reform directly targeted against fraudulent claims.

As resources have been deployed in tackling crash for cash scams, fraudsters have moved into other areas of injury claims. For that reason, we can see justification for an extension of the recent whiplash reforms so that they apply not just to all motor claims intimated to the RTA Portal (and apply not only just to those claims falling within the definition of “soft tissue injury” prescribed by the MoJ last year) but to all claims intimated to the EL, PL and EL disease Portals as well. Our view is that whenever there are types of Portal claim which are not affected by the reforms, those areas will potentially be exposed to increased levels of fraud, as fraudsters move from the more heavily regulated part of the Portal to the other areas that are not.

Consequently, we would suggest that the fight against fraud would be benefited by the mandatory claims search being extended across the whole of the Portal. In a similar way, MedCo should also be extended so that it applies to expert evidence in all classes of injury claim, as experts can be enablers of fraud. Over the past year or so, there have been a number of reported cases involving a small number of experts who predominantly produce reports in motor claims, who have been the subject of criticism or sanction for failing to have proper regard to their professional obligations to the court. We expect more to follow. Our experience tells us that it is naive to think that these issues are peculiar to motor claims.

No doubt the kinds of issues we refer to above will diminish as MedCo matures and as accreditation takes place for that type of claim. However, because medical experts in claims outside of MedCo, as well as non-medical experts in all types of claim, are not subject to the MedCo processes of independence, accreditation and audit, any extension of MedCo should be accompanied, we believe, by a wholesale review of Part 35 of the Civil Procedure Rules. The evidence is there to suggest that obligations currently placed upon experts under Part 35 to ensure that their primary duty is to the court rather than to any party are not being met. Extending MedCo across the Portal, might be one way to start to address the issue and to ensure that all experts undergo an accreditation process, similar to the one that is being created by MedCo.

The rise in commercially driven rehab should be of concern to the Taskforce and is an area that is open to exploitation and attack by fraudsters. In our view both the incoming  MedCo process as well the updating of the Rehabilitation Code both need to ensure that there is independence in the rehab supply chain and an obligation to provide clear and transparent invoicing, at a fixed price wherever possible.

We set out some of our other observations to the Taskforce below.

Adverse practices in the claims process

We have identified a number of adverse practices by those involved in the claims process that the Taskforce should consider and address:

  • Solicitor practices:

    • Advertising which trivialises the claims process, suggests that claiming is easy, or that there is a pot of money waiting to be collected, should be banned

    • Failing to properly validate new instructions - in our view, a large number of fraudulent claims would not be brought if those claims were properly validated. AskCUEPI may assist (although it won’t in the case of a first-time fraudster). Work should be undertaken with claimants’ solicitors to develop a ‘fraud checklist’.

      • To support this, we suggest an end to the litigation exemption under the Money Laundering Regulations 2007.

    • Flouting existing procedural rules.
      • Statements of truth – in our view, there is little or no regard paid to the proper signing of a document containing a Statement of Truth and the penalties for falsely signing are often not conveyed by the solicitor to the client. There should be an obligation upon a solicitor/claims adviser to warn the party signing of the penalties for falsely doing so and an obligation upon service of that document for the solicitor/claims adviser to confirm that warning has been given.

      • Sending the claimant a suite of blank court documents at the very start of a claim, such as a list of documents, or a notice of discontinuance and having the claimant sign them.

  • Experts – whilst MedCo should hopefully address some abuses, we believe that there should be an end to practices like ‘desktop’ reports.
  • AMC/CMCs – cold-calling should be banned.

Engaging and educating the customer

Speaking at the recent DWF Fraud Conference in London, Mark Allen, Manager Fraud and Commercial Crime at the ABI, suggested that the ‘£50 on every policy’ message was becoming tired. We agree. We believe that consumer engagement is only ever likely to deter the opportunist fraudster.

The ABI’s own research, conducted by Professor Gill, is likely to provide some answers as to how best to reach the consumer on this issue. In our view, some of the less obvious consequences of being caught (inability to secure employment, breakdown of relationships, social stigma) should be emphasised.

Also, more needs to be done to educate consumers about the indirect cost of insurance fraud (stretched NHS services, emergency service resource, etc.)

Challenging fraud without damaging the customer experience

Excellent data-mining processes and good analytics, combined with well-trained, fraud aware teams within insurers must be the goal. Practice within the industry varies widely, as in fairness one would expect, but detection at FNOL stage by means of good training and practice has a critical role to play.

Screening procedures at the point of quote are equally critical and the Insurance Fraud Register can be an important component at policy inception.

It is tempting to conclude that ‘naming and shaming’ convicted fraudsters and the accompanying wide media coverage of convictions and prison sentences would be a good deterrent. Some research suggests this not to be the case, though.

Use of data

We believe that the wider sharing and exchange of data (with appropriate safeguards) would be hugely beneficial, particularly with those processing insurance claims, but who are not insurers themselves, such as:

  • Local authorities

  • Third party administrators

  • Insureds carrying large deductibles

  • Members of the financial services community, e.g. banks

To better support the industry’s use of data we would suggest that it is time to consider whether CUE/CACHE should be overhauled so that it is more sophisticated and fit for purpose.

Issues – often more imaginary than real - around the Data Protection Act 1998 also lead to problems and a refusal to release subject data. There is a clear need for more education here.

The future implementation of the new EU Data Protection Regulation is unlikely to assist insurers. The Regulations as they are currently drafted provide for a need to obtain permission from a subject before subject data can be obtained.

Ultimately, the answer may lie in a specific Insurance Fraud Act, but we suspect that that would be a last resort.

Looking forward, we expect there to be a number of further roundtable meetings and we shall of course keep be keeping you updated as those take place. In the meantime, should you require a copy of our response to the Taskforce questions, please do get in touch with us.


For further information please contact James Pinder, Partner and Head of Fraud on (+44) 1772 55 4120.

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This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.