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There’s More To Counter Fraud Than Red Flags. A CEO’s Viewpoint. By John Eves BA;MBS;FCCA;FCILA;Fuedi-ELAE Managing Director, Thornton & Partners. Introduction. Joined T&P in 1983 Specialised in BI and “Fidelity” Joined Board in 1989 Managing Partner in mid 90’s
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There’s More To Counter Fraud Than Red Flags A CEO’s Viewpoint. By John Eves BA;MBS;FCCA;FCILA;Fuedi-ELAE Managing Director, Thornton & Partners
Introduction • Joined T&P in 1983 • Specialised in BI and “Fidelity” • Joined Board in 1989 • Managing Partner in mid 90’s • Approx 250 people, 10 branches • Standard PD, BI, Injury and Desk • Specialist companies in Marine, Engineering,Counter Fraud, Jewellery, Fulfillment
Fraud – What Do We Mean? Three Functional Distinctions • Insurance definition suggests fiction or exaggeration • Fidelity Guarantee – e\e fraud, bank & bonds • Transaction Fraud – Stewardship aspect
A Loss Adjusters Perspective • We are the Response Team, the Reactors • Our actions are governed by the problem presented • Investigative strategy governed by scope of the problem presented
What is This Counter Fraud Business? • Is it old fashioned “proper” adjusting? • Is it a reclassification of what we already do? • Is there a standard unit of measurement? • When is a fraud not a fraud?
The Answer – Maybe! • The difference is one of degree • Lawyers present can comment on the continuum from: Inflated view – overstatement- fraud • We all measure fraud differently • Is our classification sufficiently robust – no. • Where do all these numbers come from?
Types & Classes of Counter Fraud Effort • Good Adjusting Practice & Management • Intake- point alerts at Agent\Insurer\Adjuster • Initial professional assessment, pre inspection • Conversation Management techniques pre\post visit • On-Site work • Forensics, PI& MI
Don’t Forget! • “Fraud is proven when it is shown that a false representation has been made: knowingly; without belief in it’s truth, or recklessly, careless whether it be true or false.” (Derry v Peek 1889)
Examples • It didn’t happen • Set-up or Contrived • Deliberate • Genuine peril, but exaggerated • Not covered, but made to fit • No insurable interest
This isn’t Rocket Science • Fraudsters exploit simple weaknesses • Don’t look for the complex • Look for the blindingly obvious • Traditional alerts, followed up by diligent work • The answer lies in best practice systems • Customer service protocols- a fraudster’s weapon
System Problem-v- People Problem • Errant behaviour more often caused by systems, not people • People with malintent exploit those system weaknesses • They don’t often create them • In summary, opportunities present themselves • When looking for fraud, try this angle
Fraud – Larger Losses • What is the mission \ vision of the organisation • How is that manifested in actual behaviour • Percolation factor • What is the character of the working environment • Is it supportive, fearful, turbulent
The “Personality” of an Organisation • Procedures • IT Usage • Internet Usage • Photographs • General PC Access • Maintenance and Change Routines • Firewalling • Management • Compliance
Old vs New & Volume vs Project • Independent verification • Division of Duties • Internal Audit • Fraud Lines & Registers • All investigation: Service, Cost, Expectation
Prevention v Detection • The big savings are in prevention, more than absolute detection • Reducing financial crime: an FSA statutory objective • Insurance industry is not the law. • We gather facts
For Your Organisation\Job • What training do you get\give • What protocols are in place to protect e\e’s • What do the protocols say about referrals • Is it easy or rewarding to refer • For those who take the escalation baton: Are you trained in interview techniques Are you aware of DPA constraints How safe are your files and mails
Research • According to the ABI 10% admitted to their last claim being fraudulent 50% knew ‘someone’ who has committed ins fraud • 63% are thought to have made honest and truthful new applications for household, motor and holiday insurance • The public believed 41% were completely false. • Estimated £1.9bn insurance fraud p.a. • £44 per policy is absorbed cost for claims fraud
Why Bother tackle Fraud • It’s our job • Helps keep claims costs down • This has Solvency and Reserving implications • The Regulator says so • Right customer signal • In theory, honest claimants get through faster • In theory, better resource matching & allocation
Hurdles • Increased effort & process is costly • Is effort rewarded • Is outcome measured • Information sharing is inadequate • Burden of proof is high, so how good is the work • Volume processes present opportunities
The END Thank You