Crime of Opportunity: Can Service Stem Insurance Fraud?

Survey suggests better training, clearer claims education for customers.

Insurance fraud may not just be a crime of opportunity–to inflate the value of lost property, or exaggerate accident injuries–it may stem from weaker elements of insurance customer service, according to a study that links poor service with higher fraud rates.

While the usual motivations–money, the idea that it isn’t a crime–still drive fraud, poor policy and claims service can also play a role, encouraging false claims and other dishonest behaviour, say analysts at Accenture. More than half of the respondents (55%) to the consultant firm’s 2010 Insurance Consumer Fraud Survey said that low quality customer service would make individual customers more likely to commit fraud.

Another chance

In a way, poor service only adds to the chances for dishonest policyholders to commit fraud, according to the survey report’s authors, Michael Costonis, managing director of Accenture’s North American insurance practice, and Jim Bramblet, the company’s North American claims lead.

But insurers and their partners have an opportunity of their own: the industry should create a better claims experience for customers, building the kind of loyalty that would dissuade clients from making fraudulent claims, the authors say.

They also point to opportunity for insurer partners, like brokers, such as better training  for non-claims staff, better management of consumer expectations and more consistent customer follow-up as potential solutions for rising insurance fraud rates.

That training should focus on  customer expectations, says company spokesman Jim O’Brien. “If customers understand that there might be a delay of some weeks before claim filing and settlement, they might be less likely to think they are getting poor service,” he told Canadian Insurance Top Broker September 29. ” Similarly, if they understand deductibles, coverage limits, etc. they are less likely to be disappointed.”

By shoring up service, companies and their partners can also curb opportunities for individual fraud incidents and free up resources for bigger operations, the report points out.

“Carriers can reduce the impact of ‘one-off’ consumer fraud that occurs on a claim-by-claim basis,” Costonis and Bramblet state. “They can focus their investments and efforts on more organized, institutional fraud where improvements in customer service have zero impact.”

Attitudes and action

Policyholders in the U.S. are filing more claims–the survey found that the number of respondents who have filed one or more P&C claims at some point  jumped by 20% since 2003. And more claims means more fraud, with the odds growing even more in a weak economy–the National Insurance Crime Bureau in the U.S. found that  “questionable” claims went up by 14% in the first six months of 2010.

In Canada, the Insurance Bureau of Canada (IBC) estimates that over 26% of all personal injury claims include “elements of fraud.”

The survey report–released September 22–offers some insight into why people commit insurance fraud. When asked why they thought fraud occurred, respondents said perception is a key factor–well over half of those surveyed (68%) said people would commit fraud if they thought they’d get away with it.

Money matters

Money also plays a major role–60% said those who commit fraud need the money and a significant number tied the action to the cost of insurance. Forty-two percent  thought they’d do so because their premiums were too high, and 33% said they’d do so to make up for their deductible.

And respondents faith in insurers to curb fraud appears to be waning–only 9% thought insurers were “extremely capable” on the fraud front, while 30% saw them as “very capable.”

The 2010 Insurance Consumer Fraud Survey gauged consumer perception of fraud, insurance service and industry actions to combat fraud.

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