The future of fraud part 2: What is fraud?

In the second part of this series, we get back to basics and explore what exactly constitutes insurance fraud and how it's evolving.

So, what is fraud?

What are we talking about exactly when we refer to 'fraud', and specifically in this case, insurance fraud? This is not a conversation about motor claims fraud or dishonest slips and trips, it's more nuanced than that. It's no longer about only the claimants or the solicitors seen to be profiting from them. It's not just a staged or fictitious event. Nor is it limited to gross exaggeration of losses relating to a genuine event. 

Instead we find it more useful to talk about fraud being an attack on weak process.

And by this we mean any process. Risk management processes, the claim notification process, pre-litigation processes both within insurers and the pre-action protocol and the MoJ Portal, the litigation process and the trial process.

None of this is a cheap shot or criticism of these processes. They are not designed as fraud prevention measures. They are business enablers built around necessities and business priorities such as commercial expediency, access to justice, the customer journey and the user experience. Society has to be open for, and be able to do, business. It's just that these desirable outcomes also happen to be breeding grounds for fraud. So, fraud becomes a cost of business - but one that we can and should mitigate.

What does fraud really look like?

The headlines will always focus on big issues or events, but the reality is that claims fraud is more like shoplifting than bank robbery. By this it is meant that we are dealing with little and often events that are designed to go under the radar and constitute a flow of reward over time with reduced risk.

When you examine low-value/high-volume (and velocity) events like claims fraud you realise the true cost is enormous. Turning back to my shoplifting/bank robbery example, let’s look at the numbers: