If the insurance sector is to turn claims optimisation into an everyday component of how it engages with claimants, could it risk undermining the massive effort to combat insurance fraud?
Insurance fraud is one of the big issues for the insurance sector, discussed at every board meeting and at many conferences. There’s a lot of publicity surrounding it as well, as insurers seek to engage with the public to make sure that everyone understands that insurance fraud is wrong and that it is not a victimless crime.
And let’s be clear: combating insurance fraud is an ethical thing for insurers to do. And as I have mentioned in earlier posts, how insurers go about tackling insurance fraud has ethical dimensions to it too. Indeed, all of those campaigns to tackle insurance fraud, and to build public support for doing so, sit within a wider landscape of how insurers and claimants engage with each other in the reporting and settlement of an insured loss.
The public supports insurers collecting data to tackle fraud
There’s a general acceptance I believe amongst the public that insurers will gather data about claimants and their claims in order identify fraudsters. And insurers make no bones about doing so – it’s how many insurers greet a new claimant reporting a loss. Yet how many claimants would then expect the insurer to use that information to change the anticipated settlement amount?
Claims optimisation is emerging onto that wider landscape of how insurers and claimants engage with each other. And as I explained in this earlier post, it raises some pretty serious ethical questions, foremost amongst which is whether the amount that a claim is to be settled for should reflect what a claimant would be prepared to accept. In other words, if a claimant is hard up, would offering them a speedier settlement of a smaller amount be acceptable?
The public often voices concerns that claims settlements never seem to match the financial loss they experience from the insured incident. And to a large degree, that’s often down to a lack of understanding of what is covered and how settlements arrangements are set out in the policy. That’s what professionalism amongst insurance people is meant to compensate for.
Claims optimisation would fatally undermine that support
Yet if those same insurance professionals are now to use all that data being collected to tackle insurance fraud, to implement claims optimisation, it seems more than a little likely that public trust in insurance claims could be fatally undermined. And their support for the tackling of insurance fraud would be an early casualty.
‘So what?’, some insurance people might ask. Tackling insurance fraud is the right thing to do, and paying claimants what they’re prepared to accept is just good business – “…we just have to get on and do it”, they’ll say.
Yet such thinking is born more from a position of detached power, than from an understanding of the ‘public interest’ that professionals have to uphold. Remove the power and then what? It doesn’t take a lot of imagination to foresee what a group of parliamentarians will think of claims optimisation, were they to start questioning insurance executives or the regulator about it.
The Achilles Heel of Insurance Fraud
Telling claimants that you’re collecting data in order to combat fraud, and then using it to optimise claims settlements, could turn out to be the Achilles Heel of insurance fraud. It could even prove to be a nadir for insurance professionalism.
Insurance executives need to ask themselves whether they can afford to lose public support for what they’re doing to tackle fraud. Or to put it another way, can they afford to lose the support of the public in parliament? Ethical leadership is needed in insurance claims, and the emergence of claims optimisation could be the issue around which its strength and direction become clear.