Technology: the future of tackling insurance fraud in Ireland?

Written by Holly Whitehead on Wednesday October 26, 2016


The insurance market is a dynamic sector offering increasingly sophisticated products to its customers and providing competition to other parts of the financial services industry. The insurance sector’s growth is particularly noticeable with some jurisdictions reporting a doubling of premiums in the last decade. Unfortunately being a dynamic market with so many products makes this industry vulnerable and at the same time very attractive to fraudsters.

Insurance fraud is defined by Action Fraud as occurring when ‘false claims are made to insurance companies’ and can include a customer claiming to have lost more than they have or purposely damaging the possession/property that they are insured for or even a staged claim. It could also include an individual purposely providing false/incorrect information to gain lower insurance premiums. Insurance fraud could cover anything from motor vehicle to household/personal insurance.

Fraudulent claims account for a significant portion of all claims received by insurers, and cost the industry millions of pounds. However the problem is that a large percentage of the population tend not to see it as a crime and, having paid their premiums for years, are ‘owed’ some of that money back. Another rationalisation by people that commit insurance fraud is that no one is losing out except the ‘big insurance companies’, who can afford to lose the money. This is a significant problem, and governments and other organisations are making efforts to deter such activities. It also has a knock on effect on consumers; according to the AA Ireland, insurance fraud adds approximately €50 onto the cost of every car insurance policy in Ireland.

Irish flagFocus on Ireland

In 2003, the Insurance Confidential was created by Insurance Ireland which is the voice of insurance in Ireland representing 95% of the domestic insurance market. It was set up in response to the rising levels of insurance fraud in the country and, since its formation, has received over 9000 new cases of suspected fraud. This illustrates that even over 10 years ago, insurance fraud had already been identified as a problem.

Then, in 2004, the Civil Liability and Courts Act was introduced which at the time were radical reforms. Such reforms were intended to reduce legal costs in personal injuries claims but mainly to tackle fraudulent claims. The Act, for example, made insurance fraud punishable by a maximum fine of up to €100,000 and/or up to 10 years in prison. However, according to Dearbhail McDonald in the Irish Independent, they haven’t worked in tackling the fraudulent claims. McDonald has gone as far as stating that ‘something has gone catastrophically wrong in the Irish insurance market despite the introduction’. For instance, the amount of money lost to fraud every year in the insurance industry in Ireland is estimated at about €200 million. This is based on the estimate that for every €1 of fraud identified, there is another €3 that goes undetected.

Last week, Insurance Ireland held their fourth annual fraud conference. The aim of this conference is to nurture an industry approach to dealing with fraud through enabling meetings, training and networking of fraud and special investigation staff from insurance companies. At last year’s conference, Tom O’Brien, the Chairman of the Insurance Ireland Anti-Fraud Forum states that in the next twelve months he hopes to see more co-operation between the Garda (Irish police) and Insurance Ireland, not unlike the Insurance Fraud Enforcement Department (IFED) which has been set up by the Association of British Insurers in cooperation with the UK Police. This, unfortunately, doesn’t seem to have happened if a press release from AA Ireland in June this year is anything to go by. They reiterate the need to share data between the Garda and insurers and to develop and roll out the ‘Integrated Information Data Service (IIDS) data hub’ to allow insurers to share information on applicants and reveal any fraudulent patterns. They state if it can be done in the UK, where the legal framework is similar, why can’t it be done in Ireland?

At this year’s conference, speaker Adele Summer, Head of Fraud Intelligence and Strategic Development for the Counter Fraud Unit at RSA Insurance UK, gave a keynote speech on tackling the insurance fraud market. In this she articulated the need to use technology to combat insurance fraud because fraudsters move with the times and so therefore the insurance industry should do the same. This includes risk profiling and social networking technology allowing the user to link ‘entities’ across apparently unrelated social networks. She also states that in the digital age we’re living in, people expect instantaneous results and to be able to complete applications and claims online from start to finish. This can also be exploited by fraudsters and therefore the insurance industry must embrace a layered technical defence to this.

What happens next?

Kevin Thompson, CEO of Insurance Ireland states in his Welcome Address in the Brochure for this year’s fraud conference that earlier this year they launched the first of three adverts in their Anti-Fraud advertising campaign to raise public awareness with the third advert coming out next year.

Raising awareness is incredibly important in the fight against fraud. However it appears from Insurance Ireland’s fraud conference, and recent media interest in the subject, that the future of tackling insurance fraud is new and emerging technology and using this to thoroughly look at ways to recognise and predict emerging fraud trends and patterns and take preventative steps. Only then do we have a hope of staying one step ahead, or at least on a par with, the fraudsters.

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