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Insurers need to strike a fine balance between compassion and efficiency over the next few months as the aftermath of the recent floods takes its toll, according to insurance fraud experts at law firm Browne Jacobson.
While it is important to deal with immediate concerns, such as providing householders with appropriate alternative accommodation, robust systems to guard against fraudulent claims need to be put in place quickly, according to the firm.
Simon Robinson, one of Browne Jacobson’s insurance partners is concerned that many insurers may face significant increases in the number and scope of fraudulent claims over the next few months. He said: “Research* shows that 48% of people would not rule out making a fraudulent insurance claim in the future, and recent flooding gives people a great opportunity to do so. While insurers need to be sensitive at a time when some families are facing trauma and loss, recent catastrophes in the Midlands, Wales and the North of England will inevitably create opportunities for those on the ‘make’.”
Indeed the firm is especially wary of ‘me too’ claims, where opportunists who have previously had flood damage, or know someone who has been affected, create their own crises. Robinson said: “Insurers would be well advised to keep an eye open for the opportunist who puts a running hosepipe into their unloved car, with a view to claiming for ‘flood’ damage later. Similarly, we need to watch out for untenanted, poorly maintained buildings that may be prime targets for spurious flood damage cases. In these cases, insurers need to use all the prior information and intelligence they have and be prepared to defend cases vigorously.
Browne Jacobson works with several of the industry’s biggest insurers, defending them against the continuing rise in bogus claims, especially in the areas of personal injury, motor claims and residential/commercial property.
Robinson continued: “Inevitably, insurers will need to relax standard controls in this area to cope with the sheer volume of claims. However, this does not mean that the door should be left open to fraudsters – it’s really a matter of good planning and prioritisation on a few key areas."
Specifically, Browne Jacobson is urging insurers to adopt the following best practice to reduce the number of fraudulent claims:
- Keep existing claims processes where possible – take this opportunity to quickly review current processes and keep in place what you can.
- Retain control over repair authorisation – this is a key area where tradesmen and fraudsters can collude to inflate prices and pocket their winnings.
- Check completed work wherever possible and ensure both parties – tradesmen and insured parties know this. It’s good practice to remain in control as it sends a strong message that you mean business and won’t be 'taken for a ride'.
- Re-engineer your processes to focus on suspect claims as soon as they become apparent. Typically, this means confirming the claimant’s details; utilising CIFAS and other industry shared databases to identify fraudsters and looking out for IFB operations and IFIG warnings.
Robinson concludes “The real issue here is to identify potential fraudsters early. Simple ‘red flagging’ strategies won’t necessarily work as good fraudsters are adept at making themselves appear like genuine claimants from the outset. It’s all about setting up the most efficient processes early, using data and intuition to spot potential fraud early and then focusing on those few suspicious cases.
“We are working increasingly closely with insurers to help them combat fraud with the ultimate aim of reducing the number of cases we are involved with in court."
Footnotes
*Association of British Insurers - Facts on Fraud No 1 (2003).
