At a glance
- The annual cost of motor insurance fraud in the UK has reached £775m, according to latest figures
- Fraudulent claims lead to steeper car insurance premiums for honest customers
- We look at how motor fraud is evolving and how technology can help to detect and deter fraudsters
Motor fraud is a significant challenge for the insurance industry, and ultimately leads to honest customers paying more for their premiums.
Zurich and its industry partners take a proactive approach to tackling motor insurance fraud, using a range of investigative techniques and technologies. However, with fraudsters continuing to refine their strategies, the industry must always be thinking about how to respond to these evolving threats.
The evolution of motor fraud
“Motor fraud is in many ways an industry within an industry,” says Scott Clayton, Head of Claims Fraud at Zurich. “For the last 12 years or so, we’ve been dealing with crash-for-cash claims, which have typically involved organised gangs taking to the road and either crashing into each other or inducing a commercial vehicle to crash into them. This has flooded the market with personal injury claims.”
Motor fraud has continued to evolve, posing challenges for the industry. As Scott explains: “Many people will have received a text or a phone call asking whether they have been in a recent road traffic accident. These are driven by claims farmers looking for a non-fault claim.
“What often happens following a collision is that a claims company will contact a non-fault victim repeatedly until they are persuaded, often reluctantly, to submit a claim alleging they were injured.”
Unchecked, this sort of action leads to a motor insurance market contaminated by fraud, which results in steeper premiums.
“Down the line, with developments such as autonomous vehicles, we expect the nature of motor fraud to keep changing. It is important that the industry keeps working to spot trends early and combat new fraud techniques.”
How technology is detecting and deterring motor fraud
In-vehicle technologies, such as telematics systems and dashcams, have an important role to play, as Scott explains: “These are fantastic investigative tools and they are getting more advanced all the time. Modern telematics systems, for example, can provide an exact speed at the point of impact. If someone is alleging they suffered whiplash when the telematics indicates an impact of 3mph, this provides a good indication that there is a claim to defend.
“Dashcams can offer an independent view of an incident. Previously, if a commercial vehicle driver claimed that a crash was caused by the vehicle ahead slamming on the brakes, defending the claim would have been difficult.”
As well as in-vehicle technology, developments in data analytics have been crucial in advancing anti-fraud detection techniques.
A major step forward has come with Zurich’s investment in NetReveal software, which will be used to detect suspicious claims patterns across Zurich’s entire portfolio.
Scott says: “Through complex algorithms and data analytics run across different business lines, NetReveal can help uncover individuals trying to hide their real identity to avoid traditional detection techniques. For example, we can quickly identify when an individual who has been investigated for a suspicious household claim appears on a commercial vehicle claim.”
Technology enables cross-industry anti-fraud collaboration
“As an industry, we rely on industry-wide data for fraud detection,” says Scott. “Things such as the Claims and Underwriting Exchange database have been around for decades, but with the power of data analytics and big data aggregation, bodies like the Insurance Fraud Bureau can identify individuals perpetrating fraud with other insurers.”
Industry collaboration, supported by technology, is also helping to block known fraudsters from buying policies. The Insurance Fraud Register – the industry’s repository of known fraudsters – can be downloaded by insurer members and compared against internal data sets, allowing for rapid identification that can reduce the chances of motor fraud being committed.
The role of brokers and customers in detecting fraud
While technology is playing a crucial role in helping to detect and deter motor fraud, brokers and customers also have an important role to play.
Scott explains: “We rely on commercial customers to flag suspicious cases. If a fleet driver, for instance, thinks that something is not quite right about the behaviour of another driver or drivers at the scene of an accident, we would encourage them to notify their broker, and ultimately Zurich. The earlier we get sight of a suspicious claim, the better chance we have of defending it, which benefits brokers and customers alike.”
For more information on the issues discussed in this article, please get in touch with your local Zurich contact.
This article counts towards accumulating your annual CII CPD structured learning hours for Claims.
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Summarise latest claims trends and identify how the insurance market is responding
Counting the cost of car insurance fraud
Research by the Association of British Insurers, published last year, found the total cost of detected fraudulent motor insurance claims reached £775m in 2017.