Nov 19, 2012 2 min read

Privacy and Surveillance – pt3 – insurers need some mutual self insurance

In my preceeding post about the privacy issues thrown up by surveillance, I ended with the point that those commissioning surveillance need to strike a balance between some very real concerns that people have about being watched and the need for controls to counter the fraudulent use of products like insurance. So how well have insurers been managing that balance? And what sort of tensions have they been encountering?

UK insurers seem to have been achieving a rather mixed score in how well they’ve been managing that ‘surveillance balance’. On the one hand, counter fraud activity has become more organised, both within individual insurers and across the overall sector, and it’s become more joined up across the product lifecycle of most policies. This will have helped to structure the contribution that surveillance will have had into this.

On the other hand, cases seem to regularly come to light that point towards some (often large and well established) insurers having inadequate standards and procedures to ensure the right quality of input that surveillance has into the claims evaluation process. It’s not so much to do with the decision to commission surveillance, but with how that surveillance is then carried out. In a submission to a recent Parliamentary enquiry into the conduct of private investigators, the UK’s Information Commissioner cited aggressive surveillance by insurance companies as one of its most upheld sources of complaint.

I’ve commented in the past about inadequate standards and procedures in relation to the surveillance of insurance claimants diminishing the public’s trust in insurers and undermining the credibility of cross sector initiatives like the Insurance Fraud Register. Two particular features of insurance surveillance combine to exacerbate this exposure. Firstly, the surveillance supply chain has several layers, within which sit all sorts of providers, from large corporates to private individuals. Secondly, the private investigation sector has no clear standards of conduct and are subject to no regulations.

One might think that as their anti-fraud push gains momentum, insurers could rely on large corporate surveillance providers to maintain standards of conduct. Unfortunately that seems to be wishful thinking, with evidence of unacceptable practices by leading surveillance providers not hard to come by. At the same time, the aforementioned Parliamentary enquiry heard evidence that, in order to obtain the sought after results, questionable surveillance would be sub-contracted down the supply tiers to those less concerned with how the required information is obtained. The Home Affairs Committee hearing this evidence were sufficiently concerned to not only recommend that private investigators be regulated, but also recommend that those commissioning surveillance and utilising the information it provides be licenced.

The prospect of having its claims departments regulated not only by the Financial Conduct Authority, but licenced by a private investigators authority as well should act as a wake-up call for insurers to agreed cross sector standards of conduct for how they want surveillance to be undertaken and to introduce them into the contracts of whoever provides them with surveillance information. They need to make sure that the primary provider takes contractual responsibility for the conduct of all sub-contractors down through its supply tiers.

It should also act as a stimulus for improved governance around how claims departments handle information about potentially fraudulent claimants. We should be able to confidently say goodbye to the days (unfortunately not that long ago) when information that could only have been obtained illegally was accepted and put to use by claims departments.

If all this sounds like rather a lot of hassle and red tape, just at a time when insurers are doing their best to tackle the fraudsters that are costing honest policyholders many millions of pounds, then turn it round and think of it this way. Implementing standards of conduct for providers of surveillance would be a form of ‘mutual self insurance’ for that overall anti-fraud initiative. Without such ‘mutual self insurance’, the sector risks loosing the public’s support for its anti-fraud initiative and having the Insurance Fraud Register dragged through the courts.

Duncan Minty
Duncan Minty
Duncan has been researching and writing about ethics in insurance for over 20 years. As a Chartered Insurance Practitioner, he combines market knowledge with a strong and independent radar on ethics.
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