Skip links

DataWalk- Insurers are you Ready?

Insurers – Are you ready?

by Andy Pagett, MCMI 

In the UK the 23rd of March 2020, will be a date that will no doubt be remembered in history as the day the UK Government imposed a stay-at-home order banning all non-essential travel and the closure of public spaces invoking emergency powers not used since the Second World War.

The Chancellor of the Exchequer issued the blunt but very real warning that lengthy restrictions would severely damage the UK economy, impact behaviour & long-term mental health.

 Covid-19 impact in Numbers

  • The Private Sector felt the pain of lockdown, especially in areas such as Retail and Hospitality where well-known brands and long-established businesses both large and small failed creating a devastating knock-on effect to unemployment with rates quotes by the (ONS) reaching 5% and predicted to peak at 7.5% by the middle of 2021;
  • Add to this the fact that almost 10 million people were placed on the furlough scheme between its inception up to the end of December, financial worries and an uncertain future will shape people’s attitudes and behaviours;
  • In the UK, the FTSE dropped 14.3% in 2020 its worst performance since 2008 and the Global economy shrunk by 4.4% in 2020 (IMF).
  • In a UK Govt briefing update in June 2021 GDP had declined by 9.8% in 2020, the steepest drop since consistent records began in 1948 and the most in over three hundred years on some estimates.

Fast forward 18-months from that fateful ‘lock-down’ announcement and we are yet to return to full uncontrolled freedom of movement or fully witness the true impact to the economy for both businesses and the general public and we of course continue to operate in a world of limited movements and freedoms.

Although the latest updates are looking more favourable for the economy, the anticipated ‘perfect storm’ scenario in Insurance fraud terms has yet to materialise.

However, that should be of no real surprise to ‘risk aware’ Insurers as the true impact of the current situation will not be felt by the industry until some form of normality returns with restrictions of movement lifted, meeting numbers relaxed and all industries and businesses reopening.

But we cannot become complacent.

Why do we anticipate there will be an increase in fraud?

Well history tells us that in times of severe economic stress and financial pressures the levels of fraudulent activity increase as last experienced following the 2008 recession.

  • ABI statistical reports remind us that Insurers recorded a 17% increase in identified fraud claims from the pre-recession year, with a total of 107,200 fake claims recorded at a reported value of £730 million.
  • This was followed by the releasing of a study undertaken by the Association of Certified Fraud Examiners (ACFE) across their membership, focussing on the economic recession which concluding that the financial pressures of the economic crisis in 2008 led to a sharp increase in fraud.
  • As reported in the UK press (June 2021) Aviva announced it had seen an uplift in identified fraud by around 10% having identified more than 12,000 instances of deceit worth £113million last year, predominately in the motor market through cash for crash scams.

It is clear by the increase in publications, dedicated on-line industry summits and conferences together with the concerns voiced by respected senior fraud executives, organisations such as the IFB and other industry bodies that there is an expected increase in fraud risk events post COVID-19.

We know all too well that all that would-be-fraudsters required is an opportunity and they will target weak or poor process in your front-line defences. We are reminded of the fraud equation:

Fraud propensity  =   ‘Inclination + Opportunity’


And let’s not forget this is no longer just a back-office challenge, fraud can be evident throughout the policy & claims lifecycle and across any product line.

Current Fraud Scams

What should be of concern to all is the identified increase in Covid-19 related on-line or telephone-based scams targeting vulnerable individuals praying on their fears linked to anything from personal banking to taxing and insuring of vehicles, and the most recent linked to the vaccination process…showing opportunistic fraudsters and scammers would stoop to any level to exploit a situation and make money.

Insurers reported reduced claim levels across 2020 as a result of lock-down and associated restrictions which has clearly reduced opportunities for the would-be fraudster to exploit and challenge insurers weakened controls and/or processes. But against a backdrop of fewer claims let’s not forget the recent reported increase in fraud levels by Aviva in 2020.

Yes, reductions in volumes are likely to continue throughout 2021, but let’s not be complacent. With the anticipated spike in fraudulent activity possibly a further 6 to 12-months away for the UK Market, there is still a window of opportunity to review controls and prepare.

 What action can we take?

A good starting point would be to consider your usual risk and compliance review process. Take an inward review of your systems controls, daily practices & processes to identify emerging risks (especially internal fraud risks with a remote workforce) and review and maintain delivery of fraud training to all staff to ensure your Teams are aware of the changing threats.

New Technology

With fraud detection very much relying on internal fraud systems take a look at our ‘Next Generation’ fraud detection and investigation solution – DataWalk – which is currently deployed and used by leading insurers, law enforcement & government agencies.

DataWalk applies AI, Machine Learning, and flexible rules-based technology against both internal and external data sources to assess the likelihood of a case being fraudulent and produces a single ‘adverse fraud score’ which can be applied to both automate ‘high risk’ referrals for investigation or fast-track ‘low risk’ claims for straight through processing.

Where deployed, the solution has significantly reduced the false positive rate to (<10%) across a variety of Insurance product lines. Add to this the ability to use the system as an ad hoc investigation tool as well as a platform to ingest data from various sources to create a single customer view its combined capability can reduce the need for multiple solutions. Configuration of the system is tailored to each individual client’s requirements, and you can be up and running (and self-sufficient) in a matter of weeks.

Leave a comment