HMT Publishes Insurance Fraud Report

The Government makes 25 recommendations in its report into insurance fraud, published on 18 January, 2016.

The report is the product of the Insurance Fraud Taskforce, chaired by David Hertzell, which held a number of discussions during 2015, and was attended by a wide number of industry bodies, inlcuding the CHO. The taskforce maps the problem of insurance fraud, looks at what has been done to tackle it and makes a range of recommendations, listed below: 

Recommendation 1: To improve consumer understanding of insurance products, the insurance industry should · be more mindful of policy and other documentation following the FCA discussion paper on ‘Smarter Consumer Communications’. Good practice on this topic should be coordinated by the ABI · increase promotion of the CII’s 'Made Simple' service · roll out the ABI and BIBA’s ‘Code of Good Practice’ to help insurers and insurance brokers recognise and help potentially vulnerable customers4

Recommendation 2: To ensure anti-fraud messaging is targeted and hard-hitting · The ABI, IFB and IFED should oversee the development of a long-term, crossindustry public communications strategy. This should include increased promotion of IFB’s ‘Cheatline’, highlighting the impact of fraud on honest policyholders, use of the media and trusted intermediaries and communication channels outside of the insurance industry

Recommendation 3: The insurance industry should strive to improve the quality and quantity of data available in fraud databases and data sharing schemes, including by · following the standard definition of insurance fraud produced by the ABI and the ABI should encourage members to participate in its annual fraud statistics benchmarking exercise · ensuring that the data available is accurate. Insurance Database Services Limited (IDSL) should allow the public to check their own claims histories through CUE free of charge, and challenge inaccurate records. There should be a free and accessible checking and appeal process for all databases used in the application and claims processes.

Recommendation 4: In light of forthcoming EU regulations,6 the ICO should provide the insurance industry and others with clear guidance on data sharing practices in relation to insurance fraud

Recommendation 5: The ABI should develop and promote voluntary ‘best practice’ guidance based on what the most effective firms are doing to tackle fraud, including a short ‘checklist’ on measures all insurers can take to improve their counter fraud defence

Recommendation 6: Insurers should ensure Board level ownership of counter fraud activity

Recommendation 7: The ABI should consider how it resources its counter fraud activity and whether more priority should be given to this task

Recommendation 8: The ABI should discourage the inappropriate use of pre-medical offers Recommendation 9. The insurance industry as a whole should consider following the established good practice of some insurers in defending court proceedings where they believe the claim is fraudulent

Recommendation 9: The government should review how fraudulent late claims can be discouraged through changes to court, cost and evidence rules considering options including · recent claims (e.g. within 6 months) proceeding as normal through the fast track, but older claims being dealt with in the small claims track (SCT) · reducing recoverable costs by 50% if a minor personal injury claim is notified six months after the accident · introducing a system of predictable damages for soft tissue injuries

Recommendation 10: The insurance industry should remain vigilant to emerging fraud and should coordinate its engagement with government through the ABI

Recommendation 11: The insurance industry should support the development work needed to evolve the IFB into a holistic intelligence hub and ensure timely contribution to the evolved dataset

Recommendation 12: The Claims Portal Limited should give IFB access to Claims Portal data

Recommendation 13: The government should · consider strengthening the fining powers of the SRA for fraudulent or corrupt activity · consider reviewing the standard of proof used in cases put before the Solicitors Disciplinary Tribunal

 Recommendation 14: The SRA should take a tougher approach to combatting fraud including by · making clear that it will give an appropriate focus to combating financial crime through its existing powers, including naming and shaming · considering requiring solicitors to undertake client identification checks in cases other than just those where they handle client money · working with the CMR to enforce the referral fee ban

Recommendation 15: Insurers should provide the SRA with evidence regarding claimant law firms suspected of insurance fraud and the SRA should investigate and act robustly. The IFB should act as a single point of contact between insurers and the SRA 

Recommendation 16: In implementing the whiplash reforms outlined at Autumn Statement 2015, the government should consult on introducing a mandatory requirement for referral sources to be included on CNFs and claims should only proceed where CNFs are complete. Insurers should share data with the SRA and CMR if they suspect claimant representatives of breaching the referral fee ban

Recommendation 17: The ABI, in conjunction with the IFB, should produce guidance to its members setting out what forms of direct contact is acceptable with the alleged claimant if they suspect that legal representatives are acting without instruction 

Recommendation 18: Claimant and defendant representatives (APIL, MASS, FOIL and ABI) should produce a standard letter in conjunction with the SRA and IFB for insurers to send to claimants directly to verify whether they have instructed a firm to represent them

Recommendation 19: The government should establish a stronger regime for CMC regulation and ensure that it has adequate resources and powers to do its job effectively. In particular the regulator should · effectively police the referral fee ban · prevent the use of "phoenix" companies · consider how to deal with those organisations providing claims management services outside the regulated sector · liaise with the ICO regarding the abuse of data protection rules maintain a robust regime to ensure those regulated are run by fit and proper persons

Recommendation 20:The government should · develop and deliver a coherent regulatory strategy to tackle nuisance calls that encourage fraudulent personal injury or other claims, in partnership with the CMR, IFB, ICO, ABI, Ofcom and SRA · put the ICO’s Direct Marketing Guidance on a statutory footing

Recommendation 21: The ICO should · work with regulators operating in countries where nuisance calls are commonly sourced to tackle nuisance calls internationally · coordinate a communications strategy to inform consumers what giving consent to use of their data means in practice

Recommendation 22: The government should consider introducing a fixed recoverable costs regime for noise induced hearing loss (NIHL) claims The Taskforce endorses and supports the CJC’s investigation into how a fixed recoverable costs regime for NIHL cases (and perhaps other similar cases) might work, and how the handling of NIHL claims might be improved by both claimant and defendant representatives (including how evidence is obtained and presented), and recommends that this work should include consideration of quality standards and/or other thresholds for medical evidence

Recommendation 23: Aggregators should establish the use of existing fraud databases and data sharing schemes on a consistent basis in order to improve the industry’s ability to detect fraud at the point of quote

Recommendation 24: Aggregators should proactively engage with insurers and come to a collective data sharing agreement to tackle insurance fraud in order to detect suspicious consumer behaviour at the point of quote. This initiative should be coordinated by the IFB

Recommendation 25. The government should establish a legacy vehicle to ensure that Taskforce recommendations are implemented The legacy vehicle should continue the effective dialogue between different stakeholders regarding insurance fraud and should be made up of industry representatives similar to that of the Taskforce. It should review progress against these recommendations and fraud developments generally and should report to government once a year initially for 3 years. It should produce an annual report to government on progress and areas that need to be improved