Insurance fraud remains a financial drain on our industry and your clients

In February 2010, a woman tripped and fell in her office. Subsequently, a claim for personal injuries was lodged against the woman’s employer by her solicitor. Claims personnel in Aviva, the company’s insurer immediately suspected there were issues with the claim owing to several unusual factors. We advised the solicitor that the case would be fully defended. Over the following years, various medical reports were produced showing progression of the injury and the plaintiff’s solicitor sought on several occasions to settle the case before it was listed for court hearing. We refused to negotiate maintaining at all stages that we suspected the claim was not legitimate. In June of this year, the case finally came before the High Court. At the door of court, the plaintiff sought to settle the case for €25,000, some €35,000 less than the threshold value for a High Court case. Once again, we refused to settle. With barely an hour to go before the hearing, the case was withdrawn, thirteen years after it was first instigated.

The solicitor representing the claimant in the case is a prominent member of the legal community as are the senior counsel. The doctors who provided reports to substantiate the injuries are well respected members of the medical profession. Given the experience of these professionals, one must wonder why they felt it legitimate to advise their client over a thirteen-year period that the case was strong enough to go to court. One must also wonder, what changed on the day to cause them to withdraw the claim, having made one final attempt to extract a settlement payment on the steps of the court, as no new evidence emerged on that day. Aviva’s stance was consistent throughout, yet the case was pursued for thirteen years with all the time and costs involved for the policyholder, insurer, courts service and the various experts appearing for the defence. This is not an unusual occurrence and unfortunately, these costs are passed back to every policyholder in the form of increased premiums.

Claims like this galvanised our decision in 2015 to invest heavily in fraud detection, both people and systems. A team of expert investigators drawn from both the insurance industry and retired gardai, led by Rob Smyth, a former Garda Superintendent, was put in place to support a zero-tolerance approach to fraud. Our strategy is aimed at tackling claims fraud but also underwriting fraud. And our investment is paying off as we are seeing reductions in the volume of policyholder (underwriting) fraud detected, indicating that fraudsters and in particular “Ghosts Brokers” are aware of our vigilance and no longer target Aviva to the same extent. Two of the largest “ghost broker” networks recently prosecuted by gardai were first identified by Aviva. These networks often prey on the most vulnerable in society. According to gardai, one of these networks is estimated to have arranged c. 9,000 motor insurance policies using fake or forged documentation which are estimated to have cost the industry €23 million.

Regarding claims fraud, in a recent analysis of our claims statistics that we reported in the media, we said that there is an increasing trend of suspected fraudulent claimants withdrawing their claim either before or on the steps of the court when they see that we will not settle and are prepared to defend the claim in the courts. We have seen 91 cases withdrawn in the last two years, and a further 70 cases were heard by the courts and thrown out in the same period. Given that Aviva is just one insurer in the market, the real number of suspicious claims being pursued must be a multiple of that.

In addition to our fraud investigation experts, a rapid response team of over 50 experienced investigators, based all over the country, are employed by us to provide a 24/7 service to our policyholders. They visit the scene of an incident on the day it occurs to support the policyholder, speak with witnesses, and gather any evidence available as to what actually happened. This service allows us to provide immediate support to policyholders who are often in distress and to gather first-hand versions of events before memories fade or physical evidence is lost. This can be vital in determining liability and has proved to be immensely useful in resolving cases over the years.

Insurance fraud is as old as the industry itself. Early examples of fraud in the 1800’s led to the establishment in law of basic principles such as insurable interest. More recently, I recall as a young claim’s handler in the 1980’s, observing the emergence of fraud rings who targeted car hire companies and local authorities with claims from staged accidents. The Celtic Tiger period saw the emergence of “fraud tourism” when people would fly into the country for a day to conspire with local contacts to create an ’incident’. As we look to the future, we can only imagine how the emergence of AI and sophisticated cyber-crime software will facilitate further attempts to defraud.

All of this makes it even more important that we continue to be vigilant in rooting out this menace which causes distress to innocent policyholders and significant financial loss to insurers even when the defence of a fraudulent claim is successful.

At Aviva, we continue to invest in software and other resources to combat fraud and, where we have evidence to support our position, we will never settle a claim before a court hearing.  This means there are some cases where the court may find our evidence is insufficient, and we bear additional costs that could have been avoided through an “out of court” settlement. However, this means that an independent judicial assessment has been made of all the circumstances and we have done everything possible to support our customer and avoided the possibility of providing financial gain to a fraudster for the sake of commercial economics.

There has been some mention from politicians and media of insurer’s obligations under S.19 Criminal Justice Act, 2011 to report suspicions of fraud to the gardai. We take this obligation seriously and have reported in the region of 1,000 suspected fraudulent claimants/policyholders since 2015. It is unfortunate that constraints on the resources allocated to the garda specific fraud investigation unit have meant that not all these cases have been pursued. However, it must be acknowledged that the gardai have had some notable successes in this area in recent years. Notwithstanding the increased garda assistance in tackling insurance fraud, the volume of criminal prosecutions is still far too low. However, a fact that is sometimes missed in the commentary is that the obligation to report suspicions of fraud applies to all citizens, not just insurers. It is up to the entire community of those involved in the industry to make every effort to thwart fraud. In particular, the small minority of legal and medical practitioners who enable such acts must be held to account.

Unfortunately, we experience first-hand the dreadful impact that motor accidents have on our customers, particularly when they believe that the other party is exaggerating or falsifying their claim.  Our customers are subjected to unnecessary stress and trauma over a protracted period as they await the outcome of a court case. They find the whole legal process and the prospect of having to give evidence in court to be very intimidating and we work hard to give them every support that we can through this time. It is very much not a victimless crime.

It would be naïve to believe fraud can be eradicated from this industry. However, with adequate investment in resources, diligence in holding firm against suspect claims, and lack of tolerance for those who enable this activity, significant progress can be made in combating it. As the old advert said, ‘insurance fraud is a crime that you pay for in your premium’.  Let’s all do our best to fight it.