The Insurance Fraud Register is to be launched in July, as a national database of proven fraudsters. In my last post, I outlined some ethical issues around the extent to which a fraud has to be proven to go on the database. In this post, I want to point out some similar problems to do with the interpretation of ‘fraud’.
The Insurance Fraud Register (IFR) is being funded by the trade body for UK insurers, the Association of British Insurers (ABI). While the ABI has a definition of fraud, it’s been described by Richard Davies of Axa, a leading figure behind the creation of the IFR, as ‘very rudimentary’. In a roundtable organised recently by the Post Magazine, Davies went on to say:
“One of the things that… (the launch of the IFR) …will do is completely redefine what we mean by ‘proven’. It will give us a standard that we can all buy into backed by a clear set of process manuals.”
He went on:
“If we are going to move forward with justifiable data sharing in a structured and controlled way, …we have to get behind one definition (of fraud) and we move away from redefining it so it fits our own needs”.
So in four months time, a large number of UK insurers will be feeding information on ‘proven fraudsters’ into a national database, without having first agreed amongst themselves what they mean by fraud. I suspect there is quite a lot of variation across the market in how fraud is being interpreted. Couple this with similar variation around what insurers mean by proven and the IFR starts to sound like a creaky proposition.
I’ve read market comment that insurance fraud could encompass everything from overstatement or exaggeration of a claim, to completely staged accidents. Yet when you’re in the midst of some complex claims negotiation, how does the insurer differentiate between, on the one hand, the strong and energetic case being put forward by a claimant and on the other hand, fraudulent overstatement? It can be a fine judgement to make.
It’s sometimes said by sections of the public that insurers will always try to negotiate your claim down, hence the need to overstate your claim in order to end up with about the right amount. One attendee at that Post roundtable happened to touch on that debate:
“How we actually go ahead and negotiate the claims sometimes doesn’t lend itself to demonstrating a fraud. We will negotiate the claim down and adjust it, but it won’t give us the evidence we need to genuinely say, that is a fraud.” (my emphasis)
If the common definition of fraud eventually adopted by users of the IFR is cast so wide that it doesn’t differentiate between gross exaggeration and everyday forms of claims negotiation, there’s a danger that innocent policyholders will be stigmatised by being labelled as proven fraudsters. This could create a public backlash against the IFR, with its practices being challenged in both the court of public opinion and the courts of law.
It is right for insurers to challenge suspected fraud, but they must do so within a rule set that both insurers and insureds have signed up to. So those responsible for getting the IFR up and running need to do three things quickly:
- Consult with consumer groups on an appropriate definition for both proven and fraud.
- Enforce that definition on all insurers submitting data to the IFR
- Ensure that independent and robust audit procedures are in place to check that that definition is being adhered to.
My fingers are crossed. The IFR is an important development and needs to be a success for both insurers and the public at large.
