No market is free from insurance fraud, and its negative effects on both insurers and the policyholders they serve are universal.
To provide a snapshot of insurance fraud around the world, we asked RGA professionals in offices across the many markets RGA serves – from the U.K. to South Africa, from Spain to Taiwan – to identify the top three fraud trends they are seeing. Interestingly, we found more commonalities than differences and that the modus operandi of fraudsters doesn’t vary much from country to country.
A wide range of trends identified fall into the following categories:
1. Identity fraud
“Identity fraud” is a broad term that involves a number of methods to misrepresent details around the life assured or beneficiaries. Examples include:
- “Buying” unidentified bodies at morgues and presenting details for the deceased as a life insured
- Using false information regarding home address and contact details to manipulate risk management information
- Changing bank account details shortly before an insurance claim is submitted to divert payments from a legitimate bank account to the fraudster’s account
In some markets “accident-only cover” is not uncommon and may be manipulated by fraudsters to relax claim requirements and investigation practices. Altering details or portraying organic events as accidents is not as difficult as one might think. Examples of fraudulent activity identified across various markets include:
- Taking out accident-only cover and making an early claim on the policy, fabricating the details of the accident
- In the context of disability income insurance, providing the details of an “accident” but presenting with symptoms more consistent with a complex or mental health disorder, e.g., fibromyalgia or post-traumatic stress disorder
- Surgeons or dentists deliberately injuring their fingers to attract a 100% payout on a permanent disability product
- Using “accidents” on medical reimbursement cover for visits to emergency rooms over weekends, bypassing the need for pre-authorizations or notification of admission – often using the same documentation to claim from multiple insurers for the same event because the timing (out of usual business hours) of the claim limits insurers’ ability to review concurrent claims
While the increased use of technology both at sales and claim stages provides obvious benefits, it also introduces additional risks. Examples of related fraud include:
- Taking advantage of online sales where the identity of the policyholder and life insured is difficult to confirm at claims time: How do we know that the person that was insured and made disclosures is indeed the person that has now died?
- Tampering with claims evidence using tools that can alter the details on an electronic document such as a PDF
- Changing the name on a medical report to that of the insured person to obtain benefits under a critical illness or disability product
4. Non-disclosure and misrepresentation
An overarching sentiment across the different markets is that insurers may have become “desensitized” to policyholders being dishonest about important facts pertaining to their health, occupation, income, and hobbies. Non-disclosure continues to be problematic and shows no sign of declining, especially because investigating non-disclosure is time consuming and insurers’ ability to access and act upon information can be severely restricted in some markets. In fact, many insurers may not even consider this fraud, but rather an unfortunate consequence of doing business in insurance.
India provides a good example: Due to stringent regulations, insurers must proactively analyze and identify high-risk policies within their portfolio before claims occur. After three years, only “hard fraud” enables an insurer to decline a claim, and non-disclosure is not included in this. Developing aggregate industry databases to identify high-risk factors, suspicious advisor behavior, and previously declined applications is a step in the right direction to help insurers improve the risk pool.
A problem shared is a problem halved. The information presented here is nothing new, but it does reinforce that insurers around the world face similar challenges when it comes to fraud. The best way to overcome these challenges is to learn from each other. By joining forces and sharing best practices, we can better defend ourselves against those looking to defraud us. This means joining industry organizations dedicated to preventing fraud and participating in events like the RGA Fraud Conference. Together we can develop the tools and technique to reduce fraud and protect the ultimate victims of this crime: the legitimate policyholders insurance is there to serve.