Navigating fraud prevention can be a delicate balance for insurers. Insurance fraud in the UK exceeds £1.2bn annually — so tough action is required to avoid significant losses. But at the same time insurers don’t want to alienate law-abiding policyholders and need to ensure legitimate claims are paid on time.
Fraudulent insurance claims present substantial challenges to the insurance industry, particularly as many falsified claims use intricate strategies in an attempt to avoid detection.
Insurers need trained and skilled staff to detect and prevent these fraudulent cases. Not only will these professionals have auditing, investigating and data analysis skills they will also need to have good communication skills and a keen eye for detail. Claims management teams have to carefully examine claims forms and accompanying documents, analyse discrepancies, verify evidence and use computer programmes and other tools to identify falsified claims. Additionally, they need to collaborate with external sources, such as hospitals, and internally cross-reference records to detect patterns of fraudulent behaviour.
BHSF CEO Courtney Marsh explains how complex some of these claims can be. “A policyholder submitted two types of falsified claims. The first was for their chiropractic treatment. As part of usual audit procedures, a colleague contacted the service provider who stated that the policyholder hadn’t received treatment with them.
“However, their horse had been treated by the chiropractor and the policyholder used a computer program to duplicate the format of the receipt but change the details to their own. We asked the chiropractor to confirm in writing that the receipts were fabricated.
“We checked the policyholder’s other records and found a second type of falsified claim. The policyholder had written their own evidence for several hospital in-patient stays and used the rubber stamp for the hospital where they worked, in the section that the hospital completes to verify the information.
“They used fictitious names for the signatories. We continue to check a representative sample of our claims to find further cases of fraud. We also check hospital claims for policyholders who work for hospitals.”
BHSF employs a verification procedure on its cash plan claims to identify potential fraud. This includes reaching out to service providers for confirmation and initiating investigations when discrepancies arise. Such investigations might involve confirming policyholder information, gathering supporting documentation and examining relationships.
It says its investigation team ensures compliance with regulations, seeking guidance from its governance team and legal advisors when needed.
Marsh says: “We ensure that policyholders sign a declaration at the start of the claims submission process to confirm the accuracy of the information. We audit a representative sample of claims and use the types of fraud we have previously discovered to find further examples. We can use a flag on a policyholder’s records to require an audit of a claim before it is authorised.”
Aviva says the issue of fraudulent claims has become more problematic during the pandemic. The company highlights one specific case in which a man was sentenced to jail for securing life insurance policies under his deceased brother’s name after the brother had already died of Covid. A life insurance policy was taken out in July 2020, and four months later Aviva was contacted by the customer’s brother to explain that the policyholder had died in Romania as a result of complications of a Covid-19 infection.
Aviva claims strategy and governance manager Jacqueline Kerwood says: “A claim was submitted in November 2020,eight days after the customer had purportedly died. The brother was calling to claim £100,000 under the life insurance policy.
“When customers take out life insurance policies, we don’t usually expect a claim within a few months. This can mean there was a medical history or something we weren’t aware of before the policy was taken out, and this means we need to look a bit more closely at the claim.”
Aviva reached out to the claimant, requesting permission to contact the widow of the policyholder for additional information. This inquiry aimed to clarify whether the policyholder had undeclared pre-existing medical conditions and to obtain details from the hospital and doctor who had treated him in Romania. The hospital’s response confirmed the man’s passing, but the date was not November; instead, it occurred in July. Aviva’s investigation revealed that the life policy had been acquired after the man’s demise.
Firms face the challenge of training their claims handling
teams to detect and address potential fraud effectively, while also maintaining empathy towards genuine claimants.
Marsh says: “We share some details of previous fraudulent claims, so claims handlers know what to look for, we hold awareness sessions, and we share industry best practices. Our lead investigator holds accreditation in counter-fraud measures. Colleagues attend industry events provided by the Insurance Fraud Investigators Group. We will always ask the policyholder for their comments before making any assumption of fraud and will only progress investigations where we have robust evidence.”
According to Zurich’s head of market management Nick Homer, Zurich assesses claims based on policy-defined incapacity criteria, considering factors like the working environment and management relations.
Homer emphasises the need for fair assessments and an understanding of complexities beyond medical aspects.
Homer says: “The nature of group income protection business means that we don’t really have an issue with fraudulent claims. This is because our policyholder is the employer who is the one who makes the claim, not the individual employee.
“The employee’s entitlement to benefit is through the commitment their employer makes via the contract of employment. Therefore, depending on what benefits commitment an employer has made they could still be obligated to pay an employee, even if it’s not a valid GIP insurance claim.
“Typically employees aren’t medically underwritten, therefore there is little risk of non-disclosure in that sense. Consequently, our main claim consideration is whether an employee’s illness or injury satisfies our policy definition of incapacity or not.
“I wouldn’t suggest that this is a fraudulent attempt on the part of the employee, as there can be a number of factors involved, such as the working environment, and line management relationship, which can be barriers to work and exacerbate the employee’s condition, although not fundamentally medical issues.”
Canada Life also provided insights into its anti-fraud strategies, offering a glimpse into its approach but says that it maintains discretion about its exact strategies.
The insurer emphasises its verification process, which involves corroborating information provided during the insurance application stage to detect potential inconsistencies that warrant further investigation.
Canada Life head of claims and medical underwriting Ian Ranger says: “We corroborate information provided in the initial application with multiple lines of information and sources at the claim stage. Cross-referencing multiple sources of information helps us identify inconsistencies which are followed up on. Online registers help mitigate the risks of fraudulent paper documents. We do not use these sources in isolation. We carry out controlled checks on every claim we pay and in addition, have a routine programme of random sampling at both first line and second lines of compliance and monitoring.
“We regularly train our staff in anti-fraudulent activity including how to spot the signs and what to do in such circumstances. Our dedicated Financial Crime team are on hand to investigate suspicious activities. Each fraud case we handle is unique and our investigation will not always follow the same path. We are always alive to new technologies and will always try to use the most up-to-date tools available to us.”
At Generali, the main focus is on assessing disability benefit claims to determine eligibility, though the insurer stresses its main focus is to ensure genuine support is offered to those that need it.
Generali head of claims and medical underwriting Darren Michel says: “While the majority of claims we handle are genuine cases of individuals facing health challenges, we recognise the importance of addressing any potential fraudulent activity.
“To prevent and handle such situations, we carry out desk-based research while seeking to objectively assess whether an individual satisfies the definition of disability. In rare cases where we discover potential fraud, such as an individual working while reporting an inability to work, we promptly inform the employer of our findings.
“Throughout the entire process, we treat all individuals with the utmost respect and sensitivity. Our communications regarding decisions are typically directed to the employer, but we are mindful that such correspondence may be shared with the concerned individual.”
The shared goal among insurers is to safeguard policyholders’ interests and maintain the trust that underpins the insurance sector. But instances of fraud cases emphasise the pressing need for insurers to reinforce their fraud prevention strategies, adapt to changing threats, and uphold the integrity of their processes. But insurers maintain that if this is done smartly and sensitively, making the most of advanced technology, this will ultimately benefit both the insurer and policyholders, by helping keep costs down and building a more resilient and trustworthy insurance environment.