Insurance fraud is a pervasive and complex issue that has far-reaching consequences for individuals, insurers, and society as a whole. It occurs when individuals or entities deliberately deceive insurance companies to gain financial benefits to which they are not entitled.
Fraud in Protection Insurance is nothing new. Many people will be aware of John Darwin, also known as the "Canoe Man". He was involved in a high-profile insurance fraud case in the early 2000s. Darwin faked his own death by disappearing while allegedly canoeing in the North Sea in 2002, leaving behind his wife and children. His wife collected a life insurance payout based on his supposed death. For several years, the couple lived secretly in Panama, with Darwin hiding while his wife claimed the insurance money.
In 2007, he turned himself in to the British authorities, admitting to the fraud. The case gained significant media attention and highlighted the lengths to which some individuals would go to commit insurance fraud. Both Darwin and his wife were convicted. He received a prison sentence for fraud, and his wife also faced legal consequences.
More recently in 2022, Rajesh Ghedia was jailed for six years and nine months for more than 30 counts of fraud following two investigations run by the City of London Police’s Insurance Fraud Enforcement Department (IFED), Fraud Operations team and Asset Recovery Team. By feigning that he had stage 4 pancreatic cancer and less than a year to live, Ghedia successfully claimed and defrauded multiple insurance and pension companies for sums exceeding £1.3 million.
He was sentenced to a total of six years and nine months in prison at Southwark Crown Court on Friday 17 June 2022.
Fraudulent claims are a problem for our industry. According to the Association of British Insurers (ABI) website, in 2020, insurers detected 96,000 dishonest insurance claims valued at £1.1 billion1 . It is estimated that a similar amount of fraud goes undetected each year. Therefore, insurers invest at least £200 million each year to identify fraud. Tackling insurance fraud remains an industry strategic priority.
These issues are not just confined to the general insurance industry; as we have seen in the examples above, they also affect the life insurance industry and in the last few years, we have seen and continue to see increasing numbers of fraudulent claims at SCOR.
Is technology an enabler?
Is it now easier for an individual to commit fraud against a financial institution? In an effort to pay claims much more quickly, insurers are using medical reports provided by claimants to expedite the claims process, and to good effect. Ensuring all documents are validated with the appropriate source, we have seen examples of claims being confirmed as valid the same day they are notified. However, technology can enable fraudsters to manipulate documents, such as hospital reports and death certificates, in several ways, making it easier for them to commit insurance fraud or other illicit activities. Therefore, we need to be aware of this and be vigilant to red flags. Here are examples of how technology can facilitate such manipulation:
- Digital Editing Software: Advanced digital editing software, such as Adobe Photoshop or various free alternatives, allows fraudsters to alter digital documents with ease. They can change text, numbers, or even images, making it difficult to detect forgeries.
- Digital Signatures: With the advent of electronic signatures and digital certificates, fraudsters can create fake digital signatures to authenticate manipulated documents, adding an extra layer of credibility to their fraudulent activities.
- Document Scanning and Reproduction: Modern scanners and printers enable individuals to create high-quality reproductions of physical documents, which can then be manipulated digitally or presented as authentic copies of the original.
- Data Mining and Social Engineering: Fraudsters can gather personal information about individuals from various sources, such as social media, and use it to forge convincing medical records or death certificates that appear legitimate.
- Deepfake Technology: Advances in deep learning and AI technology have led to the creation of deepfake videos and audio recordings. Fraudsters can use these to fabricate interviews or statements within documents, making their fraud attempts more convincing.
In September, SCOR hosted an Underwriting and Claims Seminar at the Royal College of Physicians, where I gave a presentation discussing fraud. When putting the presentation together, I asked SCOR’s AI expert Bálint Bóné if he could create a death certificate using ChatGPT, in an effort to prove how easy it is to create false documentation.
If you ask ChatGPT to create a fake document, it will not comply. A typical response is as follows: “I cannot assist in creating or providing information on any illegal or unethical activities, which includes creating fake documents, such as death certificates. This type of request is against the law and goes against ethical guidelines.”
However, with carefully selected questions and scenario’s, we were able to get ChatGPT to create a death certificate, which is shown below.
After creating the document, we also asked what else we would need to supply, and it suggested photographic evidence. Therefore, using Midjourney we created the following image2.
Using the prompt “Photorealistic bike accident, showing a severely damaged road bike and a car, taken by a digital single-lens reflex (DSLR) camera by crime scene investigator”, the resulting image is unique to this case and no Google reverse image search will show it is stolen. You can see that the picture is impressive on a high level.
These documents and images were created with relative ease. Therefore, it is easy to understand the level of sophistication a legitimate fraudster can attain if they have the tools at their disposal.
Industry Fraud Workshops
Whilst fraud in protection claims is not a daily occurrence, there was an increase in suspicious and fraudulent activity during the Covid pandemic. Fraud has typically been seen for overseas death claims and in Income Protection (IP) claims where people either continued to work whilst claiming or embellished their disability. However, we saw a new trend in 2021.
We saw several claims for Critical Illness (CI) benefit where the individual claimed to have suffered an event overseas and provided documentation to support their claim, which at face value, looked legitimate. However, following further investigations, a number of red flags were identified.
The claimant had a number of policies across the industry, all for benefits that were under non-medical limits and sailed through the rules engine. The covers combined often exceed £1 million. Fortunately for the industry, the fraudsters tend not to account for the fact that insurers will collaborate when fraud is suspected.
With the suspected increase in fraudulent behaviour and the belief that technology is an enabler, SCOR contacted many of our clients to ask if they would be happy to join us for a discussion and exploration of these issues and we were very grateful to our clients who attended our Claims Fraud Industry Discussion back in November 2022.
The attendees agreed that there should be a broad strategy to deal with these claims as there is currently no reliable mechanism to deal with the issues. This may be due to concerns regarding data sharing in the context of GDPR. However, where we suspect fraud, we are allowed under GDPR to share information via a Request for Access to Data (RAD1)
The group agreed that it was a good idea to share best practice, so we discussed a few initiatives before proceeding to an interactive session on working together, for example:
- Validating GP’s addresses to prevent or minimise the risk of interference with medical evidence
- More detailed conversations with claimants on CSE to provide additional reassurance that the source is legitimate and asking claims assessors to use their well-known intuition for flagging or reporting concerns
- Monitoring of GP and IFA postcodes to ensure that the details provided aren’t private addresses where there is a risk that evidence and information supplied could be false
- Referring all claims where evidence is provided from overseas (including Northern Ireland) to the philosophy team to suggest additional checks and to verify the information provided.
This was a very useful discussion with lots of healthy debate. We have since had 3 additional workshops where we included service providers to discuss the tools that they use to identify fraud and also discuss the trends they are seeing.
We also invited organisations such as Insurance Fraud Bureau (IFB), Insurance Fraud Investigations Group (IFIG) and IFED to discuss the work they do and how we can collaborate to tackle fraud. As fraud is an industry issue, we also included our reinsurance colleagues.
Last month, we had the 4th workshop where we were fortunate to have representatives from the ABI and also the IFB.
The ABI discussed how they work with the Home Office and their aim to produce a Draft Fraud Charter and their ambition to ensure that various sectors of insurance collaborate and work together to combat fraud.
The IFB discussed how they work with various stakeholders to combat fraud and the strategies they employ. The IFB have ambition to work closer with Protection insurers and this is something we hope to explore further with our industry colleagues and share with a wider group.
We would be happy to share the output from these workshops with any insurers that did not attend so please contact me for more information.
It is so important that insurers remain vigilant against fraud. Insurance fraud places a considerable financial burden on insurance companies, leading to increased premiums for all policyholders, making it less accessible and affordable for those that truly need it.
Also, repeated cases of fraud can erode trust in the insurance industry, making people sceptical of insurance companies and the value they provide.
Collaboration between insurers is key in combating fraud and there are frameworks where insurers can communicate when fraud is suspected, and it is key we understand and utilise this where possible.
Insurance fraud is a pervasive problem with profound economic and societal consequences. It victimises both insurance companies and policyholders by driving up costs and premiums. The efforts to combat insurance fraud encompass a combination of technology, public awareness, legal measures, and collaboration among stakeholders and SCOR would be delighted to continue to work with our clients to discuss this important issue.