The Big Question: Can insurers win the fight against fraud?

Fraud has been in the headlines this month as the Association of British Insurers revealed that  £1.16 billion worth of fraudulent general insurance claims were identified in 2024.  

Insurers uncovered over 98,400 fraud-related claims in 2024, a 12% rise from 88,100 in 2023.  It came as insurers said they prevented an estimated 684,800 fraudulent insurance applications, a 7.4% increase from 2023.  The figure came as the industry launched its annual Fraud Awareness Week.

Nik Jethwa, detective chief inspector at the City of London Police’s Insurance Fraud Enforcement Department (IFED), warns that the situation was a major concern for law enforcement services and the sector: “Recent convictions and proactive operations, such as our work at Heathrow disrupting luxury watch fraud, demonstrate our commitment to tackling organised insurance crime head-on. With fraudulent claims now exceeding £1 billion, our operational focus remains clear: disrupt, deter, and bring offenders to justice.” 

Ursula Jallow, director at the Insurance Fraud Bureau (IFB), says: “With the ABI reporting a rise in detected fraud, it’s more important than ever for the insurance industry to stand together in the fight against fraud. Insurance fraud harms society, and the industry recognises its responsibility to protect honest consumers by continually strengthening its prevention and detection strategies.”

Earlier this year the ABI’s  annual conference was centred around combatting fraud against a backdrop of a new political climate, changing consumer and social expectations and technological innovation.

Organised criminal gangs are increasingly using technology to stage ever more complex insurance frauds. Is the industry capable of meeting the new threats?

Lee Williams, Head of AdvantageGo

Intact’s Head of counter fraud strategy and financial crime, Adele Sumner, says insurers need to undergo a radical review of the way in which they look to combat fraud in an era where technology is becoming an ever more important weapon for the criminals.

“For many years the UK has had a data sharing agreement with the United States in an effort to tackle fraud,” she explains. “However it is not being utilised. We are not getting the data back which will help us to tackle the threats we face.

“The industry needs to ask itself a question. Will we go further when it comes to claims fraud or are we happy to continue to do the same thing we have done for the past 113 years?

“We are seeing the fraudsters using artificial intelligence to create new documentation which enables them to carry out ever more complex fraudulent claims and we as an industry are still not asking the questions. More than often we will use AI to potentially flag a fraudulent claim but we need to be going behind the documentation to look at the claim in greater detail.

“It is the only way we will be able to tackle the criminality which we face.”

Sumner, who is also chair of the General Insurance Fraud Committee at the Association of Financial Crime Prevention Professionals, said there are examples wherever you look as to how the current system simply leaves the insurance industry open for misuse and abuse when it comes to claims.

“I was recently on a trip to the USA and the airline lost my luggage,” she explains. “I then get an email from the airline which was asking me what I had in my suitcase. Immediately it opens the way for me to reel off a Rolex watch, Gucci handbag and high value items without the checks which need to be in place.

“We need to speed up what we do and look further and harder at the claims. In commercial and speciality lines insurance data is nowhere where we need it to be.”

Sumner adds: “Take the example of a container on a large vessel which can carry 10-12,000 TEUs. We get a claim that the container was broken into and the gold bars within the container were stolen during the voyage. The container had been weighed  and the bill of loading states it was carrying gold bars when in fact it was full of bricks.

“The insured says the gold was removed mid transit and replaced with bricks. Instead of simply agreeing that was the case have we actually looked at the claim in any detail? Every container placed on a vessel is logged so we can find out exactly where the container was on the vessel. If that container was in the bowels of the vessel surrounded by thousands of others, all tightly packed and stacked there is no way that the container could have been opened and anything removed mid transit. The issue we have is that at present are we asking those types of questions.”

Sumner continues: “While in personal lines we have seen a rise in opportunistic cash for crash fraud, technology is making those cases more sophisticated more complex and with it more expensive and as such it is attracting the interest of criminal organisations.

“That sophistication is significantly increasing when it comes to major commercial fraud. We know when the economy is struggling fraud increases.

“In the Covid pandemic we saw the creation of fraudulent companies taking out insurance policies to claim for losses and events which simply did not occur.”

She adds: “The last three years has seen the use of AI by claims departments to look to identify potential fraud. What we have seen is a rise in false positives which require investigation and only delay payments for honest claims. We have been casting our net too wide.

“We need to use intelligence and experience to identify the fraudulent claims. Intelligence needs to be in everything we do.

“As such it is very much about the level of type of data we can and do acquire.  We are still collecting the same data as we have done for so long and it is only about 10% of the data we need to fight fraud.”

Sumner adds it calls for a radical rethink on how we approach claims.

“The playbook and the way investigators think has and needs to change,” she explains.  “We need to change the way we operate. If we simply continue to use the same information, we will restrict our ability to detect fraud.

“We are investing in fraud technology before we actually understand the data we need to do the job.

“Fraudsters are getting better at what they do and they are keeping us up at night. We can ask why they do it but the fact is they would not do it if they were not winning.”