Feb 15, 2012 2 min read

What is ‘proven’ fraud

It was announced a few days ago that the Insurance Fraud Register (IFR) will be going live this July. Described as a national database of proven fraudsters, the IFR will be used across all product lines at all stages of the insurance lifecycle. It will be funded by the trade body for insurers, the Association of British Insurers.

A key word that could come to define the public’s reaction to the IFR over the next few years is ‘proven’. It will be a database of proven fraudsters. So what does that mean? A leading figure in the creation of the IFR, Richard Davies of Axa, has described the chances at present of fraud being detected as less than 50% and the chances of being prosecuted as less than 1%. So if ‘proven’ means proven in a court of law, the IFR is going to be a very small database.

It looks like it will be insurers who will define what the IFR means by ‘proven’ and it will sit below the legal interpretation. In other words, if insurers judge you to be a fraudster, they’ll put you on the IFR. Even though it is insurers who are funding the IFR, this seems to be stretching the use of ‘proven’ a little too far. After all, if an insurer believed it could prove an insured had committed fraud, why hasn’t it prosecuted them and recovered its outlay?

One reason that the IFR’s supporters may be sticking with ‘proven’ is that the Data Protection Act allows insurers to share intellegence on proven fraudsters. There could be confidentiality and competition issues around the sharing of information on suspected fraudsters.

This wouldn’t matter much if the IFR is to be no more than an internal mechanism for sharing fraud intelligence. Yet I very much doubt if insurers would want to limit its use in this way. The IFR will be given a lot of publicity, both at the time a policy is incepted, renewed or a claim submitted, and more generally across the media. Run of the mill insureds whose claim has been turned down because of disputed evidence could find themselves put on the IFR alongside the convicted fraudsters, but caught up in the same glare of publicity. The IFR will also be accessed by underwriters and used to refuse cover or to significantly increase quoted premiums, thereby affecting the ability of some insureds to own a house or a car. And the bulk of such cases based upon a less than legal take on ‘proven’ framed by insurers themselves.

The picture comes to mind of the insurance sector with one hand holding its own, rather secretive interpretation of ‘proven’ and the other hand holding a gun pointing in the direction of its foot. My hope is that the next four months will seen some genuine consultation with consumers about the IFR, in order to avoid a reputationally painful hole being shot in its own foot.

There’s another, more worrying, aspect of how the IFR will work that raises further ethical questions and I’ll look at that one in the next post.

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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