Opportunistic fraud
Vulnerability is a major issue
Application fraud
Due to the recent legislative changes, the definition of a ‘vulnerable’ claimant, in the context of road traffic accident claims, has changed. Now more groups of people can be considered vulnerable in respect of compensation claims, for example, cyclists. They are increasingly being targeted by claims management companies because, being vulnerable, they fall outside of the tariff cap and such claims can therefore be highly lucrative. The cost of these claims can be extremely high, as it may include items like mobile phones and expensive cycling equipment on top of the cost of replacing high-end bikes and any injuries incurred.
Opportunistic fraud (i.e. exaggerated claims) is increasing sharply. Indeed, we can see from our own data (we track and monitor fraud types, organisations, and behaviours to tackle scam activity) that opportunistic fraud is starting to come through as the highest-ranking threat. This may be being driven by professional enablers who are seeking to maximise returns on claims for greater gains.
We are also seeing an increase in application fraud, where insurance applicants - or those acting on their behalf - are creative with the information they give in order to achieve lower premiums. According to the City of London Police’s Insurance Fraud Enforcement Department, so-called ‘ghost broking’ (in which actors falsify someone’s
details) now makes up almost a third of cases they are investigating (2).
The challenge for insurers
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Essentially, the challenge for insurers and compensators is that fraudulent claims are so extensive. Borne out of the explosion of Personal Protection Insurance (PPI) claims, this issue continues to reach into all sorts of product lines and new parts of the market. It is being driven by opportunistic individuals, organised activity from companies pushing more claims into the system, and professional enablers who are seeking to maximise the value of, and financial returns from, claims.
It’s telling that according to our 2021 research that we conducted with YouGov, 86% of people who had made a claim in the previous three years said they had not approached any type of company to present a compensation claim.
All of this suggests that more people are being exposed to scams that convince them they have a genuine claim, putting them in the vulnerable position of embarking on a legal process they do not fully understand, for claims that often have no merit, with significant ramifications. For instance, our experiences show that some claimants are persuaded to take out litigation funding loans to cover the cost of pursuing the claim, others fail to understand what compensation they might (or might not) receive or the costs involved, and they may not appreciate that they could even be subject to criminal proceedings.
Ramifications for claimants
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
The impact on accommodation claims is potentially a mixed bag: Adaptations will likely inflate due to increased labour costs and higher materials prices, while house prices are reported to be decreasing for the first time in over a decade, though the impact is likely to be highly variable between regions. On the other hand, economic pressures on landlords have caused rental prices to increase significiantly. A rental property might be a short-term resolution for a claimant, for example during an independent living trial, and it could be that schedules plead longer renting periods to maximise the compensation pot.
Accommodation
In cases with rehabilitation funding in place under the Rehabilitation Code or joint instructions, we have seen case managers reporting shortages of therapists, driving up the costs of those providers still on offer. This has been particularly acute in clinical neuropsychologists in and around London. This shortage also impacts time spent and overall cost to case management fees, as sourcing suitable suppliers takes longer.
Therapies
Loss of earnings
Care & case management
Essentially, the challenge for insurers and compensators is that fraudulent claims are so extensive. Borne out of the explosion of Personal Protection Insurance (PPI) claims, this issue continues to reach into all sorts of product lines and new parts of the market. It is being driven by opportunistic individuals, organised activity from companies pushing more claims into the system, and professional enablers who are seeking to maximise the value of, and financial returns from, claims.
It’s telling that according to our 2021 research that we conducted with YouGov, 86% of people who had made a claim in the previous three years said they had not approached any type of company to present a compensation claim .
Rising costs
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
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A data-driven approach is key
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Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
However, half (50%) said that they had been contacted by a claims company, 10% had been approached by a law firm, and 2% by a garage or vehicle repair company, about pursuing a claim.
The landscape is changing rapidly, as scams evolve and unscrupulous operators look for new claims to feed through the system. It can therefore be extremely hard for insurers to continue to spot fraud at the point of policy or claims intimation – let alone stay ahead of the game.
Insurers are dealing with this in a variety of ways. They are tracking new behaviours that they see coming through their systems, and re-writing identification rules to spot networks and suspicious activity within claims and policy areas. Consumer education is key in helping alert people to the risk of scams and protect both policyholders and other claimants from entering into risky legal processes wrongfully.
The very nature of the way scams work means that insurers are often forced to be reactive. However, increasingly there are opportunities to leverage data to their advantage in order to spot new emerging patterns in the market in real time, so that they can be more proactive about shutting fraud down and ensuring they do not pay out for fake claims.
That’s why at Clyde & Co, we have developed a set of digital tools designed specifically to deliver the lowest indemnity spend. Using artificial intelligence (AI) and automation, these solutions can read reams of data in real time to provide clients with up-to-the-minute insights into developing trends as quickly as possible, so that they can develop a suitable strategy to deal with new issues as they arise and before they take hold.
How can compensators stay ahead of the game?
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As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
Watch out for red flags that indicate that a claim in the portal might potentially end up being of higher value. If a claim is genuinely under £25k, it makes sense to make the right decisions in the portal to resolve it cost-effectively and avoid it going to litigation. However, if there’s a risk it could go above that threshold, be very careful about admitting liability.
Leveraging data is vital, to inform your Know Your Opponent (KYO) strategies. Data can give you intelligence about the types of firms of solicitors you are dealing with and what their likely behaviours will be from their past practices. For example, data analysis can tell you which firms are seeking to maximise claim values and which are taking a volume-driven approach and therefore want to turn cases over quickly. Such analysis can also suggest what the tipping point for settling is likely to be. Armed with this information, you can treat firms differently, depending on what approach will be most effective, and even create teams dedicated to dealing with specific firms.
What can insurers do?
However, half (50%) said that they had been contacted by a claims company, 10% had been approached by a law firm, and 2% by a garage or vehicle repair company, about pursuing a claim.
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
As regulators and legislators aim to clamp down on exaggerated and fraudulent claims in one part of the market or as markets become saturated – as has happened in the cases of RTA or PPI claims - the reality is that nefarious and opportunistic behaviour then pops up in other places, fuelling claims inflation.
Looking ahead, spurious activity in consumer claims appears set to grow, particularly around consumer mis-selling. Instances of people – particularly vulnerable groups - being targeted by claims companies in new ways, such as via social media are also likely to increase. As society continues to feel the effects of the inflationary squeeze, which shows no signs of abating in the short to medium term, the impetus for claimants to be encouraged to maximise their financial return will stay strong, and something as simple as the exaggeration of an otherwise genuine claim will remain prevalent.
The extension of the fixed costs regime to a large proportion of claims valued at up to £100,000, set to come into force in October 2023, is likely to result in a potential spike in litigation involving suspicious claims.
There are further legislative changes on the horizon that could have major implications in this area. One is the Audit Reform Bill which requires directors to report on the steps that they have taken to prevent and detect fraud, placing more rigour around fraud prevention and detection. Another is the Online Safety Bill, which contains measures to prevent scam adverts from appearing on online platforms and places the onus on social media companies to regulate, risk assess and eliminate fraudulent paid advertising. However, it may be some time before this is implemented.
It can be seen that the battle against claims manipulation and inflation is a constant one, with the landscape continuously changing, and in the current environment it’s a tougher challenge than ever. At Clyde & Co, we stand alongside clients, advising them on the best strategies and guiding them to find innovative ways to tackle the issues proactively.
Looking ahead
Get in touch
Take a look at our Clyde & Co Newton offering, AI solutions for casualty claims
Get in touch
Sources
(1): ABI
(2): Insurance Post
(1): ABI
(2): Insurance Post
Sources
(1): ABI
(2): Insurance Post
Sources
(1): ABI
(2): Insurance Post
Sources
(1): ABI
(2): Insurance Post
Sources
(1): ABI
(2): Insurance Post
Sources
(1): ABI
(2): Insurance Post
Sources
