Canadian Underwriter

U.K. government task force recommends tougher regulation of claims management companies

January 20, 2016   by Canadian Underwriter

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The government of the United Kingdom’s Insurance Fraud Taskforce has recommended tougher regulation of claims management companies (CMC) in the nation.

The value of detected fraud in U.K. is in excess of £1 billion and undetected insurance fraud is estimated to cost the economy more than £2 billion a year

The value of detected fraud in U.K. is in excess of £1 billion and undetected insurance fraud is estimated to cost the nation’s economy more than £2 billion a year, according to the final report of the task force, released on Monday.

The report – prepared by MP Harriet Baldwin, Economic Secretary to the Treasury and Lord Faulks, QC, Minister of State for Civil Justice – contains a wide range of specific recommendations for government, industry, regulators and others. It is designed to tackle all fraud types of fraud (cross-cutting) and different types of fraud, including organized, premeditated and opportunistic fraud at the claims stage and application fraud when a policy is purchased. Some recommendations include:

• Strengthening regulation of CMCs – establishing a stronger regime for CMC regulation and ensuring that the Claims Management Regulation Unit has adequate resources and powers to do its job effectively;

• Clamping down on nuisance callers that encourage fraudulent claims – the government should develop and deliver a “coherent regulatory strategy to tackle nuisance calls” that encourage fraudulent claims. (According to research commissioned by the Association of British Insurers (ABI), 83% of people have been contacted by a CMC encouraging them to claim);

• Strengthening the powers of the Solicitors Regulation Authority to stamp out fraudulent or corrupt activity;

• Taking a more robust approach to defending claims – the ABI should discourage the inappropriate use of pre-medical officers and the insurance industry should defend more court proceedings where they believe a claim is fraudulent, rating that providing cash settlements; and

• Improving the data available in fraud database and data sharing schemes – increase membership of existing anti-fraud schemes and databases such as MyLicence and CUE and follow the standard definition of insurance fraud produced by the ABI.

“Implementation of the recommendations will take time, but it will also require continued collaboration,” the report said. “The Taskforce therefore calls on government to establish a legacy vehicle to provide oversight for the implementation of its recommendations, as well as to ensure that dialogue between different sectors, regarding insurance fraud, continues.”

While the report acknowledged that “one year is a short period of time to tackle such a broad and complicated issue, the Taskforce is confident that these recommendations will make a meaningful impact on overall levels of fraud, ultimately reducing costs for consumers.”

The ABI said in a statement that it welcomed the publication of the task force, which was set up in January 2015 to assess the scope of insurance fraud in the U.K. “We are pleased that the Taskforce’s report recognizes the industry’s determination to protect honest customers by clamping down on insurance fraud through the £200 million a year the industry invests in tackling this problem, said ABI’s director of general insurance policy, James Dalton, in the statement. He added that initiatives such as the Insurance Fraud Bureau, the Insurance Fraud Enforcement Department and the Insurance Fraud Register mean that fraudsters are now more likely to get caught and face serious consequences, including a criminal record, a custodial sentence and difficulty in obtaining financial products, such as mortgages and loans.

Dalton noted that the report calls for the government to set up a body to take forward its recommendations, and ABI will “work with whoever may be appointed.”