What are the initial recommendations from the Insurance Fraud Taskforce?
The Insurance Fraud Taskforce, under the chairmanship of David Hertzell have been very busy since they released their interim report back in March of this year, but they have now released the first tranche of their initial recommendations, with the second and final tranche being released later this month, ahead of the Taskforce producing their final report, which is expected by the end of the year. Many of the initial recommendations within the report have been drawn from the responses received to the Taskforce’s ‘Questions for Consideration’, which were also released in March and which DWF responded to.
DWF’s Head of Counter Fraud, James Pinder attended the Taskforce’s stakeholder roundtable last month when the group looked at the recommendations made by the Taskforce. He now sets out the key themes from the recommendations and whilst we will not know which, if any of the Taskforce’s recommendations will be accepted until the end of the year, if any of the recommendations are accepted it is likely that they will impact upon the day to day operation of claims and underwriting departments alike.
The first tranche of initial recommendations are split into two categories:
- Data sharing; and
- Industry best practice
The second tranche of recommendations will cover: ‘legal framework’, ‘consumer behaviour’, ‘regulatory bodies’ and ‘issues outside the remit of the Taskforce’.
Good data is the lifeblood of the industry and access to that data and the sharing of that data is essential in successfully combatting insurance fraud. That data sharing came up consistently in Taskforce meetings can be of no surprise and the issue of data sharing makes up the lion’s share of the initial recommendations made by the Taskforce, with nine separate recommendations and a further three from the Taskforce’s Personal Injury Sub-Group.
As we stated in our response to the Taskforce’s Questions, one of the frequent bars to obtaining data held by others, is a failure by some organisations to properly understand and apply the Data Protection Act, leading to a refusal to supply subject data as a result. An inability to access data held by others, can frustrate the successful detection of fraud and the defence of fraudulent claims and is a day to day thorn in the side. The problem is only likely to be exacerbated with the introduction of the new EU Data Protection Regulations, which are currently being agreed upon by the EU Parliament. Correctly in our view, the Taskforce have recognised that this is an issue and have recommended that the Information Commissioner’s Office issue clear guidance to the industry on data sharing in relation to insurance fraud.
The Taskforce have recommended that the industry should make better use of existing databases, such as extending the CUE database, so that claims arising out of pet insurance and travel insurance products should also be added. This would be a sensible step, especially as there is no single database capturing this data for these classes of claims and given that fraudsters do not restrict themselves to any one product line. On a similar theme, we would echo the Taskforce’s call for the public sector, especially the DWP and HM Revenue and Customs to work more closely with Specified Anti-Fraud Organisations.
In their initial recommendations, the Taskforce have suggested that the public should be permitted to access CUE free of charge, with a view to establishing whether the records held there are accurate. If this is a recommendation that ultimately features in the final report and one that goes onto be accepted by the industry, then consideration should be given as to how it would be implemented and what safeguards are likely to be needed. One could see how the criminal engaged in organised fraud, intent on making a new false claim, might make a search of CUE, with a view to researching their claims history so as to ready themselves and “get their stories straight” ahead of any medical examination, preparing any witness statement or giving evidence at trial.
The personal injury sub-group’s recommendations
The Personal Injury Sub-Group made three recommendations, the first two in respect of the Claims Portal, both of which appear to be eminently sensible and which are:
the IFB to be granted access to the Claims Portal data
as part of the work they are doing looking at NIHL claims, the CJC consider expanding the Claims Portal to include multi-defendant claims
The final suggestion from the Sub-Group was for the use of a unique identifier in MyLicence so as to prevent fraudsters from hiding their identity and avoiding detection and this proposal stems from the Sub-Group receiving strong anecdotal evidence that fraudsters are exploiting the lack of any validation process, in the absence of there being any need for claimant's solicitors to validate claimant’s identities when they receive instructions,
As we pointed out in our response to the Taskforce's Questions back in May, the current AML regulations that apply to other transactional work, do not apply to litigation. Whilst, the Sub-Group's recommendation is a good idea, it shifts the burden of validation to the insurer, when it should rest with the solicitor in our view. Perhaps this idea might feature in the second tranche of recommendations. We shall see.
Industry best practice
The need for an industry wide definition for ‘fraud’
There is a great variance in the industry as is what is meant by the term ‘fraud’ and this is something that the Taskforce have recognised. The Taskforce have recommended that the industry should better follow the ABI and IFR fraud definitions. A unified approach to defining fraud would certainly assist the industry in better measuring fraud detection rates, but could, initially at least, see success rates drop, as insurers adapt to the new definition and this may not be popular in boardrooms.
The anti-fraud message
Making the fraudster think twice before they embark upon the folly of committing insurance fraud is likely to see a reduction in fraud, as some will be deterred. As Mark Allen, ABI’s Fraud and Financial Crime Manager said at our fraud conference in April, the industry's anti-fraud message was something that was in need of a fresh approach and that the old message had grown tired. The working party that has been formed to devise the new strategy is looking to build on the good work of Professor Martin Gill by creating an anti-fraud message that is "upfront, forthright and hard-hitting".
The Taskforce has made a number of general “best practice” recommendations which it sees as being important in the fight against fraud. The fact that the Taskforce have identified the ongoing use of “pre-med” offers, which in the view of those on the Taskforce, encourage and facilitate fraud will provoke further industry debate on the issue. Educating shareholders to the cost of fraud, to discourage “shortermism”, may then accelerate the assignment of “standardised board level ownership of the issue of insurance fraud”, both of which are further recommendations from the Taskforce, although the fact that they felt the need to make the later recommendation suggests sadly the issue of fraud isn’t quite being taken as seriously as it might by all those in the industry.
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.