Insurers will be launching an Insurance Fraud Register (IFR) later this year and I expect that over the next few years, several thousand policyholders will find themselves put on it. This is the second of two posts in which I look at the ethical dimension to how information on insurance fraud is acquired, sorted and analysed. The ethical dimension is important because it supports the fair treatment of policyholders who may come under the scrutiny of insurers’ fraud teams and, more broadly, the long term backing given to this initiative by the public and politicians.
I set out two of the six themes to that ethical dimension in yesterday’s post and I’ll cover the remaining four here, beginning with number three, about social norms.
Thirdly, keep to social norms when applying labels such as fraud and proven. Both are emotive terms that have to a large extent been normalised through legal process to arrive at definitions and usages acceptable to the public at large. If insurers view fraud, or proof thereof, in terms overly accommodating to their own needs, they risk a significant public and political backlash. So the question “could I prove this in court” should always be front of mind, as should be “can my legal team show me a court ruling that mirrors this situation”. If the answer is either is no, then you should have serious doubts about applying a ‘fraudster’ label to a policyholder by putting them on the Insurance Fraud Register.
Fourthly, apply some critical thinking to the information upon which you’ll base a decision on underwriting fraud. By critical thinking, I mean looking in a systematic fashion at each of the steps taken to arrive at a decision. So, have you collected enough information upon which to base your decision, or are there some gaps in what you know? And might those gaps be material in some way to the decision being taken? If you’ve brought together information from different sources, is the nature and quality of all that information sufficient to arrive at a conclusive decision? Or does it look a bit like one plus one equals three? Is what I’m seeing really there, or do I want to see it there? If you’re using software to support decisions on insurance fraud, has it been scrutinised in a similar way? Think of critical thinking as a form of decision making quality control – to label someone as fraudulent, that quality level has to be high.
Fifthly, policyholders have a right to privacy even when under investigation for possible fraud. This means that if a policyholder has given information to one source for an agreed purpose, then it’s unlikely that you can then use that information for investigating an insurance claim without the policyholder having given their consent, under circumstances of free choice, for that information to be shared. Similar restictions apply to how information can be gathered on the ground by claims investigators. It may seem galling to investigators to have certain lines of enquiry closed down because of privacy rights, but police and other enforcement agencies have been working with such rights for many years. Such rights need to be respected even when information lands on the insurers’ desk in a fortuitous manner – that’s a lesson learnt the hard way by three insurers in Ireland who received social welfare information on claimants that could only have been obtained illegally.
And finally, be careful how you organise the investigation of fraud, by both in-house people and external third parties, otherwise you’ll stray into a minefield of conflicting interests. People and processes should of course be aligned so as to uncover and tackle as much fraud as possible, but there also needs to be controls in place to disengage how such work is recognised and rewarded from performance measures relating to case or cost counts. Employees, investigators, software providers and the like should be paid for doing a good job, but should not be incentivised on the amount of fraud they uncover, otherwise the system will end up being played and ‘fraud’ found where it doesn’t actually exist. Insurance fraud is too important for it to risk being undermined by the cutting of legal corners.
Those behind the IFR have acknowledged the importance of securing the support of consumer groups, and the public at large, in the sector’s mission to tackle insurance fraud. That support will be short lived if insurers fail to uphold the standards of behaviour expected of them.
