Why is Internal Fraud a “Thorny Issue” for Insurers?

Duncan Minty -

The counter fraud operations now in action across UK insurance focus on a range of types. There’s the everyday consumer as prospective customer. And of course, there are the existing customers themselves. Then there are the ghost broking fraudsters and the gangs trying all sorts of fraudulent claims.

Yet we hear very little about internal fraud, where fraud is committed against the firm by a person working for it. It can encompass…

  • in accounting, to arrange payments
  • in recruitment, to help someone get a job
  • in human resources, around working hours or sickness leave
  • in procurement, to help a supplier be appointed
  • in IT, to access and copy data

This type of fraud could be to the individual’s direct advantage, or to help someone commit a more systemic fraud on the firm.

It was described at a recent conference as a “thorny issue”. Yet why?

We know that gangs are placing people inside insurance firms so they can access data and tweak systems in ways that those gangs can then exploit at scale. I can’t see anything thorny in that.

And clearly, there’s no difference between a claimant who ups their claim to get a better settlement and an employee who does the same, through a fraudulent payment or CV. Both aim to benefit financially. They could sometimes be the same person. After all, over 110,000 people are said to work in insurance in the UK. Where’s the thorny issue here?

I wonder if the thorny issue lies not in tackling those who do commit fraud, but in those who might commit fraud. After all, all consumers engaging with insurance firms, from the time of quote through to the time of settlement, are monitored for their fraud potential. Clearly, there are ethical issues associated with this, many of which I’ve written about in the past (more here and here).

And of course there are ethical issues associated with how employees are monitored and handled. Yet is not the philosophy behind both pretty much the same? If insurers are happy to monitor consumers from the time they start typing their details into a quote machine, to assess their fraud potential, then surely they should be happy to do something similar with employees.

One difference of course is the dimension of power. The insurer/consumer power balance is different to that of insurer/employee. Sure, both are managed by contracts (of insurance, of employment), but the latter is more immediate, more personal, more fraught perhaps with complications.

If internal fraud is too thorny an issue for insurers to tackle, then what does that imply? If insurers are nervous about how employees overall will feel, then again, what does this imply?

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