Allianz says 2020 insurance fraud reached £65.8m
One of the world’s leading insurance companies, Allianz, has released details of fraudulent claims it detected in 2020.
The corporation which is headquartered in Munich and serves an estimated 85 million customers worldwide, said the fraudulent incidents came mainly from claims farmers, rogue loss assessors and organised crime.
However, the company also said its fraud savings were higher than in 2019, and exceeded Allianz’s target by £2.9m.
2020 rise in insurance fraud
The rise in fraud claims fell into several categories. The two main areas were in property fraud detection, which saw a 6.5% increase, while large loss claims accounted for £1.3m of savings. Allianz has a specialised and newly installed large loss team that is focussed on rogue loss assessors and has adopted a ‘Know Your Opponent’ strategy.
Organised crime insurance fraud
According to reports, a staggering £2.6m of exaggerated claims were related to cavity wall insulation claims and the fraud team handled over £5.5m of claims from organised crime operations.
This challenging trend is caused mainly by claims farming, more commonly known in the UK as 'ambulance chasers', where members of the public are cold called or canvassed and encouraged to make claims based on tenuous past incidents.
Operation Overwatch, the name of the anti-fraud detection campaign, resulted in 10 cases being opened, three being closed, eight being repudiated and £115,000 of fraud savings.
Casualty and motor fraud
Fraudulent claims for casualty incidents, which ranged from loss of property, damage and other liabilities, rose by over £2m on 2019 figures. Allianz also opened its first private prosecution case in 2020 against a detected fraudulant claim.
Speaking about the rise in fraudulent claims, but also the anti-fraud teams success at detecting them, James Burge, head of counter fraud at Allianz , said: “I am delighted that we reached such a significant amount in fraud detections and savings in 2020. We’ve taken proactive steps to improve collaboration over the past 12 months and these results demonstrate they are working. I’m very proud of our expert fraud teams—and everyone who plays a part in tackling fraud.
"During 2021, fraud detection and prevention will remain a key priority for Allianz and our plan is to continue to build on the collaborative approach we’ve put in place, which is clearly achieving excellent results.”
He added, " We're well aware that fraudsters always look for the easy targets, so we proactively look at ways to improve our detection and deterrent strategies in the commercial market. We have a zero tolerance approach to fraud and, if there's a business case for a new system that helps to beat fraud, we'll introduce it. "
Four 2020 fraudulent claims that were overturned
- A claimant alleged that a colleague stabbed her in the hand with a pen. She enlisted her daughter to lie in court and produced photos of her wound. However, documents visible in the images were dated months after the alleged attack, suggesting the wound was self-inflicted and the claim was staged.
- A man who had claimed £4,000 for personal injury—but was not in the vehicle at the time of the incident—received an immediate 12-month prison sentence with no suspension, in a landmark win for Allianz.
- A driver faked the theft and destruction of his own car, but his claim was debunked when forensics discovered his own blood on the steering wheel.
- A pedestrian claimed for personal injury after tripping on a hosepipe, although CCTV footage showed him walking and staring at his phone before and after the obstacle.
Insurtechs are winning the race with legacy system companies
Nestled in its own place within the world of financial services, insurance is arguably more unpopular than retail banking.
That’s hardly surprising given that, from a customer service perspective, insurance is something of an off-kilter transaction. You pay a sizable premium in exchange for a service you hope you will never have to use. This image problem is exacerbated by ubiquitous tales of insurers not paying out when it is time to make a claim.
The insurance sector has long been due to an overhaul, and this is where the disruptive force of insurtech comes in - one of fintech’s most upwardly mobile subcategories. Accordingly, last year, insurtech in the UK alone attracted £262m in investment, a growth of 60% on 2019, according to Tech Nation. Insurtech’s momentous growth has been captured in a new report by The AI Journal exploring this burgeoning sector.
What exactly is insurtech?
Put simply, insurtech refers to technological innovations that seek to make insurance cheaper to buy and more efficient to use. In a similar vein to fintech, the large, established institutions have been dipping their toes into insurtech, but it’s the disruptors who are genuinely looking to shake up the status quo, diving into and exploiting those areas that traditionalists have little imperative to explore.
Examples are price comparison sites (one of the earliest forms of insurtech that was eventually snapped up by the insurers it initially sought to disrupt), claims software, customisable policies, or even smart-tech-enabled dynamic policies whose premiums can fluctuate depending on changing circumstances.
The latter, for instance, could use someone’s fitness tracker or smartwatch to monitor fitness levels, thus reducing the premium of a life insurance policy; or track a GPS system that records the location of a car and assesses risk levels accordingly.
Most consumers tend to shop around for their insurance needs and perhaps end up buying their contents insurance with one provider, their car insurance with someone else, and their pet insurance with yet another underwriter. Managing all these different policies, with their varying renewal dates and payment terms can be complex. This has led to the increase in apps that pull everything together.
More prosaically, insurtechs are developing AI that uses machine learning to act as an insurance broker, eliminating the need for a human intermediary and therefore offering more cost-effective and impartial advice.
Insurtechs and risk
But there are some obstacles in the way of insurtech’s continued evolution.
Insurance companies are averse to risk. Understandably so, as at the crux of the industry is the role of the actuary, whose job it is to analyse and measure the probability and risk of future events. So it’s little wonder that there’s a reluctance among the traditional players to welcome the disruption that insurtech brings.
Insurance is heavily regulated, a minefield of legality and labyrinthine jurisdiction, which means the idea of shaking it up can be anathema. And why would they, when their old-school business models are working perfectly fine?
There’s an understandable nervousness and unwillingness to work with startups, who themselves need to work with the bigger firms in order to underwrite risk.
While it seems like a catch-22 situation, there is growing, if cautious, interest from insurance companies, who can see the benefits of insurance with a friendlier face, innovative solutions, and a competitive edge through differentiation. As that tentativeness dissipates, the growth of insurtech will gather even more momentum.
Tom Allen's analysis is based on the findings of a new report on the fintech and insurtech industries produced by The AI Journal.