AWARE

Keoghs Insight

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James Heath

James Heath

Partner

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Keoghs Fraud Index reveals opportunistic fraud on the rise

AWARE27/10/2016
Fraud Aware 5

As always, this year’s Keoghs Fraud Index makes for thought-provoking reading. An initial glance shows very little movement at the top of the table, with the big five hotspots of Birmingham, East London, Bradford, Manchester and North London heading the list for yet another 12 months.

However, in terms of this year’s big movers, the North West achieved an unenviable hat-trick. Bolton were the major top 20 climbers, scaling ten places to fourteenth. Meanwhile Blackburn rose to eighth place after several years of positive decline; a reversal which can largely be attributed to a doubling of claimants linked to induced accidents. Liverpool also sneaked back into the top ten on the back of a steep rise in opportunistic fraud, including a four-fold increase in claimants connected to bogus passenger claims.

Indeed, it is such fluctuations in the types of fraud being committed which provides the most notable trends from this year’s motor fraud data.

Continuing the post-LASPO trend, 2015 saw a huge increase in the number of claimants linked to Low Speed Impacts - a staggering 54% overall!

This re-emergence of LSI claims, and indeed late notified claims, is clearly the result of renewed and vigorous claims farming. Such claims pollute an insurer’s work streams and clearly need to be tackled. However, the value of these claims are such that they would otherwise fall in the sweet spot of handling within the portal, and need to be dealt with appropriately to ensure that indemnity spend is not unnecessarily increased.

The simplistic answer would be to simply remove all potential LSI / LNC claims from the portal, driving them into litigation and to trial in order to make the claimant “put up or shut up”. Whilst such a blunderbuss approach may generate some easy headline-grabbing outcomes, there is a clear risk that it will do so at the expense of a negative overall impact on indemnity spend.

It was for this reason that Keoghs developed our unique, and award winning, approach to injury claims validation. Our approach is one of precision, rather than carpet bombing,  and is geared entirely to reducing overall indemnity spend to below portal levels on LSI / LNC claims, whilst at the same time fighting appropriate cases to trial and securing positive trial outcomes. As the relevant articles in this issue illustrate, the results being delivered in these areas are outstanding.

Such figures, however, are not limited to LSI / LNC claims, with an upsurge in induced accidents also typifying the trend. Indeed the North as a whole saw numbers linked to induced claims rise by 16% with Bradford showing a whopping 68% increase and Bolton not far behind on 52%.

Birmingham also displayed some eye-opening numbers for opportunistic fraud - over 16% of claimants linked to LSI in England and Wales live in the Birmingham postcode. Furthermore, the area accounted for just under half of all the West Midland’s claimants linked to induced accidents.

Of course, when discussing such figures it is also useful to consider what we class as fraud and how this can potentially impact on overall classification. For that reason the Keoghs Fraud Index has also, for the second year running, analysed proven and prevented fraud outcomes, thus removing ‘suspected’ fraud from the equation. These figures are then compared to genuine motor claims processed by our non-fraud teams.

This comparative table tells a rather different story and reveals some quite significant variances.

Here, Liverpool saw the biggest positive swing within the top 20, taking second place for genuine claims and dropping to sixteenth for proven fraud. Newcastle also earned a gold star, with 83% of all claimants linked to genuine claims.

However, the capital didn’t fare well by comparison. The biggest negative shift within the top 20 fell to North London who placed sixteenth for genuine claims but fifth for fraud.

East London also appeared higher on the fraud list with 58% of all claimants linked to fraudulent claims whilst North West London finished sixth for fraud but didn’t even make the top 20 for genuine claims.

Of course, all statistics are open to interpretation and it could be argued that we are seeing trends partially dictated by market focus. By its very nature opportunistic fraud is easier to detect, potentially driving the recorded figures upwards. Identifying organised fraud, on the other hand, is a challenge which can quickly consume resources and reserves, making a tricky task all the more difficult and discouraging the industry as a whole from pursuing such claims as vigorously.

There is no doubt that a crucial element in bridging this gap is the continued use of intelligence, a vital tool in the fight against fraud, as our Director of Product Development, Dene Rowe, states:

“Intelligence is the key. Whether used to identify or validate suspected staged/contrived claims, it is quality intelligence and having the ability to deploy it which will make the difference…”   

“…As a key supporter of the IFB, we are also pleased to see the move to a centralised hub of intelligence for the industry, something which can hopefully ensure a collaboration not previously seen.”

Regardless of our interpretation, the Index gives us the opportunity for important statistical analysis which, against an uncertain backdrop of post-Brexit civil justice reform, can only aid a better understanding of the current fraud landscape.