Putting A Spanner In The Works Of Scammers
Tue May 30 2023
Shane McCabe, strategic account manager, Insurance, Ireland, LexisNexis Risk Solutions
Insurance fraud comes in many guises, as Brokers Ireland members know all too well but it’s the rise in application fraud, largely due to the cost of living crisis that is creating a real cause for concern. There are two strands to this ‘front end’ fraud – the opportunistic and the organised.
First there’s the individual who attempts to ‘hide’ or ‘manipulate’ certain facts about themselves or their vehicle in the hope for a cheaper quote. It might be that they say the vehicle is parked in a garage overnight when it’s actually on the road, or it could be that they deliberately mis-state the number of claims they have had previously. This is opportunistic fraud which has been pretty difficult for brokers and their insurance partners to spot prior to policy inception.
Quote manipulation is a particular problem. In a study[i] we did in the UK last year, 48% of motor insurance buyers thought it was completely or somewhat acceptable to deliberately misstate information to obtain a lower quote. When we asked the same question to Irish insurance buyers at the tail end of 2022, the results were a little more positive but still, 25% thought it was completely or somewhat acceptable to manipulate a quote[ii]. So that means 1 in 4 quotes may be provided on the basis of inaccurate information.
Data solutions using quoting behaviour data and past claims data are evolving to help brokers identify these cases. Of course, the more that’s done to educate customers on the risks of mis-stating information in the application, the better and brokers have always played a vital role in helping consumers understand that honesty really is the only policy when buying or claiming on insurance. The alternative could prove very costly.
Organised application fraud is on an altogether more sinister and worrying level at this time. It’s a topic we have covered before but the latest data suggests the problem is getting worse[iii]. Ghost brokers are posing as legimitate online insurance providers to lure unsuspecting consumers with artificially low insurance quotes – usually advertised on social media or other online groups. The consumer pays for a policy in full, assuming in most cases that it’s legitimate.
Sometimes the ghost broker will add the victim as a named driver to an existing, legitimate policy, unbeknown to the victim or the main proposer of that policy. They may also set up a policy in the victim’s name then cancel it. These tactics mean they have documentation to pass on to the unwitting consumer. The scam soon comes home to roost when the victim either has an accident or is pulled over by the police for being uninsured. Either way, they have lost their money and risk losing their car.
It’s little surprise that tougher regulations on social media are being called for by LV=. This is in response to a 31% rise the insurer has seen in policy fraud from Q4 2022 to Q 2023[iv] and a 143% increase in ghost broker referrals LV= has made to the police. Aviva in November last year said ghost broking is making up 15% of all policy fraud due the cost of living crisis[v]. And just a reminder that in the past 12 months more than 55,000[vi] fraudulent motor insurance applications have been discovered by the Insurance Fraud Bureau.
As we have stressed in previous blogs for Brokers Ireland on this worrying trend, one of the best ways to tackle ghost broking is to know more about the applicant before policy inception. More often than not, a ghost broker will supply their own email address for documentation from an insurance provider. It therefore makes sense to check that email address and its digital footprint as early in the application process as possible. Does it have links to fraud? Does it bear any relation to the proposer’s name? These are the questions brokers need to ask themselves as part of the identity validation checks they undertake at the point of quote. Solutions such as LexisNexis® Emailage® Rapid can answer those questions and now more than ever that insight is needed to put a spanner in the works of insurance scammers.
[ii] 1000 insurance purchasers surveyed in the ROI, November 2022 through Maru/Hub.