Identifying the enemy in insurance

Apr 01, 2020

One of the major challenges facing insurers trying to protect themselves from fraud is that of identifying the enemy.

A study by Professor Martin Gill and Amy Randall for the Association of British Insurers found that although there is a wide range of types of insurance fraud, insight into the perspective of those behind it is “lacking or entirely absent”.

Difficult as it is, insurers must develop profiles of the threats they face. So how can they tackle this complex task using the information available to build a broader picture?

The answer lies in identifying patterns of behaviour. Here are six profiles, based on collective experience, that can help guide insurers as they build their anti-fraud defences.

The Accidental Criminal
Fallen on hard times, the accidental criminal sees their insurance claim as a means to escape a financial mess. Whether inflating the value of a genuine claim or inventing a loss, the accidental criminal feels fraud is no big deal – a one-off to get through a difficult period.

The Habitual Opportunist
This individual often evolves from the accidental criminal. Having got away with fraud once, the habitual opportunist sees the possibility of regular, guilt-free income and looks for new methods and new companies to defraud. What started as a one-off has become a habit but, for now at least, remains a part-time pursuit.

The Criminal Insider
A trusted team member, the criminal insider looks and acts like everyone else in the office – but poses a potent threat to security. Either acting willingly or coerced by a criminal gang, the criminal insider’s job is abetting an external attack by guiding fraudsters through your defences.

The Former Employee
Previously a cultural risk in the office, the former employee can turn into a physical security risk once outside it. This can be manifested in a number of ways – from downloading and removing customer data to writing ‘logic bomb’ malware into software to be triggered when they choose. They may be out the door, but the threat remains.

The Fraud Facilitator
Without this individual a large amount of insurance fraud would not take place. Either part of an organised gang or acting alone, the fraud facilitator will carry out a cyber attack and feed the data to other gang members or sell it on to other criminals, allowing them to commit more ‘traditional’ fraud against the insurer.

The Organised Criminal
Insurance fraud is probably just one of several strings to the organised criminal’s bow. They might be running a crash-for-cash ring, a team of hackers or be involved in drugs trade, people trafficking or some other criminal enterprise. Insurance isn’t the attraction. Access to data and cash – and lack of defences – is the lure.

This is by no means an exhaustive list, but it shows how each profile requires a tailored approach. A blanket approach to fighting fraud doesn’t reflect the nuances of the threat.

So while insight into who exactly is committing fraud may be lacking in detail, the collective experience of the industry does give valuable indicators as to how best to prepare the necessary defences.

(Editor's Note: The article was written by Chris Andrew; original article here. Reposted with permission.) 

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