Coming a cropper - Data farms and insurance fraud
02 September 2019
Amidst other significant enforcement activity, the Information Commissioner’s Office (ICO) recently reported raids on two UK addresses as part of an ongoing investigation, conducted in partnership with the Insurance Fraud Bureau (IFB), into the suspected illegal acquisition and sale of personal data. The suspicion was that high volumes of data farming activity, or vishing, was taking place at these addresses to illegally obtain the personal data of motor accident victims to sell on to solicitors for personal injury insurance claims. In the context of the ongoing fight against insurance fraud, this is an important development. Below I highlight three of the most important themes I took away from it.
Cooperation (and patience) pays off
This event marks another apparently successful example of public and private cooperation leading to action against suspected organised crime groups. By all accounts, it combines the provision of actionable information by the private sector (the IFB being an insurance industry funded not-for-profit organisation focussed on the detection and prevention of organised fraud) and a competent authority using the armoury it has been granted by law. In this sense, it embodies the intent of the UK Government’s recently published Economic Crime Plan for 2019-2022, whose strategic priorities include the pursuit of “....better sharing and usage of information to combat economic crime within and between the public and private sectors across all participants”. In addition, given the recent increase in the Information Commissioner's powers following the coming into force of the GDPR, we can expect to see greater inter-agency co-operation.
Furthermore, since being established in 2006, the IFB’s investigations have contributed to hundreds of convictions for organised fraud activity. It’s ongoing success is, at least in part, linked to its longevity. As its processes and collaborations have matured over time, so too has the IFB become even more successful at coordinating the pursuit of the most complex schemes. The recent events serve as a reminder that, when it comes to cooperation in the fight against financial crime, persistence can pay off.
A win for the intelligence-led approach
The IFB’s real strength lies in the fraud intelligence it generates and shares across its communities. Amongst other things, this allows insurers to rapidly react to emerging fraud risks, thereby disrupting ongoing fraud schemes across the connected market as a whole.
A common complaint raised by insurers is that their internal anti-fraud procedures generate huge volumes of alerts, most of which prove to be false positives, and the work involved in addressing the alerts often ends up negatively impacting the customer experience. In this context, the value attributed to the intelligence-led approach spearheaded by the likes of the IFB is enormous. What’s more, it would suggest that further investment in counter-fraud intelligence assets is warranted. I have seen first-hand the benefits of an intelligence-led approach where the aggregation/consolidation of disparate data sources combined with the right analytical resources (tools and teams) has led to significantly enhanced financial crime disruption.
The industry can never rest on its laurels
The concern surrounding claims management companies allegedly encouraging dishonest claims has been on the industry’s radar for quite some time. However, uncovering and proving such fraudulent activity is often very hard, as the individual claimants are often credible (having probably suffered a legitimate insured event) and the actions of the company are mostly unrecorded. The recent events described above are a reminder of the fact that the fraud risks facing insurers are ever evolving, and no sooner has one link in the chain been repaired that another one, less visible than the last, busts open. However, as history has shown, no fraud is without some trace - albeit only a small one. As such, the ability to access and interrogate comprehensive data sets is the key to the insurance industry getting to grips with its fraud problem.
