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There is much change ahead for the murky world of motor fraud, with a combination of the proposed Civil Liability Bill, continued drive for efficiency in the compensation process and the huge pace of technological change affecting both motor vehicles and claims handling.
One might think that the proposed reforms will see an end to fraudulent motor claims, and indeed, this is a central message surrounding the Government’s ongoing plans to tackle what they see as a whiplash epidemic.
Certainly the anticipated two central planks of the Bill, namely the introduction of tariff damages and the increase in the small claims track to £5000, along with the banning of offers to settle claims without medical evidence, is likely to reduce a fraudster’s appetite for pursuing a fraudulent whiplash claim. However, does this really mean the end of the road for motor fraud?
We all know fraudsters are adept at navigating changes in the motor insurance landscape. As quickly as a loophole is closed, another is identified and exploited. With whiplash alone under the microscope, the value in pursuing low value whiplash claims, together with the low fixed costs they will attract, is only likely to continue as a profitable exercise for highly organised and automated claims businesses.
However the proposed reforms, in whatever guise they eventually appear, do nothing to tackle the frequency of claims being brought (though this has fallen slowly from its peak) or the costly abuses of vehicle damage and hire. In a world where replacement taxi-cabs are being claimed at £600 per day and repairs and re-plating are frequently delayed to extend the period of hire, the limitation on the value of a whiplash claim seems like small beer.
Much will hinge on the definition of whiplash in the Bill, but already Keoghs frequently sees injury claims featuring non-whiplash symptoms, from sprained limbs to PTSD to loss of libido. In fact, the definition of whiplash is in danger of becoming an obstacle to navigate, rather than a force for positive change. Already there has been a significant increase in non-injury motor claims featuring substantial claims for credit hire, and that trend, currently isolated from the obligatory use of the Portal, is only set to increase.
It would also be fair to observe that the recent explosion in holiday sickness claims has coincided with both the whiplash reforms and the impending cut-off for PPI claims. I am not suggesting for one moment that the claims in PPI or holiday sickness are fraudulent (though I have little doubt that many of the latter are questionable), but the claims machinery is built and will adapt. Once the look and feel of the reforms is known, the market will react and that response is unlikely to be a wholesale withdrawal from the motor claims world. As the consolidators acclimatise to legislative change they risk becoming enablers of fraud in the brave new world of tariff damages. It seems inevitable that holiday sickness claims is a bubble that the government will burst, and we take our eye off the motor fraud ball at our collective peril.
Running parallel with the Civil Liability Bill is the incredible pace of technological change within the entire claims environment. The need to process claims efficiently, cost-effectively and fairly means both claimants and compensators are quickly embracing emerging technologies to automate and streamline processes.
It is almost certain we will see significant consolidation in the claimant personal injury market with large, well organised players able to make an acceptable level of profit within a much tighter costs regime. However the ability to do so is highly contingent on an investment in technologies which automate the handling of low-value whiplash claims.
Such an advancement will also present compensators with the challenge of subjecting those claims to the appropriate levels of scrutiny in order to combat fraud, while also ensuring that genuine claims are met promptly and kept within the Portal process (and out of litigation).
So, for both sides of the fence, artificial intelligence capability could prove to be key in the near future. From a counter-fraud perspective, this creates its own significant challenges, whereby identifying fraud will be framed in a fast-paced, low-intervention process.
The new generation of fraud detection systems are the answer, providing the capability to quickly validate all claims rather than having to isolate suspected cases before applying anti-fraud rules.
Rapid technological changes are also occurring on the road, with the proposed Automated and Electric Vehicles Bill signifying a clear statement of intent to accelerate the pace of development required to manage the transition to a world where electric and automated vehicles co-exist with driven vehicles.
How this will affect fraudulent claims remains to be seen, but it is clear that telematics or equivalent technology will play a part. Nevertheless, despite the hype surrounding the potential for telematics to change how we investigate fraudulent motor claims, the cost of independently interpreting the data is expensive and an anathema to a judiciary keen to strip out the cost of expert’s reports in low value claims. Furthermore, the data is not wholly reliable or pin-point accurate; it is dependent on how the ‘black box’ is fitted and, in truth, this is not what the technology was developed for.
Inevitably, however, the development of automated and semi-automated vehicles means that much more accurate data will be available. Depending on the cost and complexity of extraction and interpretation, this will prove valuable in establishing the truth of a suspected fraudulent claim. That said, we have already seen cases where the telematics technology has been used to validate a fake accident and there is every reason to believe that this trend is set to continue with the technology becoming more commonplace.
We are in a period of unprecedented change effecting claims handling and validation, whilst vehicle technology is also undergoing a seismic shift. However, despite these new tools and innovations, to dismiss the majority of fraudulent motor claims as a thing of the past would be a grave mistake. All the ingredients for a ‘perfect storm’ of motor fraud are still in place, and taking our eye off the road to focus on the horizon rather than the threat directly ahead could result in serious and costly repercussions.