The changing shape of fraud in the UK market - ABI Fraud Statistics

Shyam_Bhatt

With the latest release of the ABI fraud statistics, there have been some interesting numbers highlighted.

The figures indicate that the total number of fraudulent claims detected fell by 19%. But looking deeper at the figures – whilst the number of fraudulent claims detected reduced, the average value of a suspicious or fraudulent claim increased to £15,000 – a 20% increase from the previous year.

Does that mean fraud has reduced?

My view is that looking at the numbers it implies that insurers may have good measures in place to detect the traditional fraud scams, however an increase in the average claim indicates that fraudsters are changing the way that they are trying to defraud an insurer through cost-layering for example.

One figure from an insurer in the market as an example highlighted that previous to the OIC and Whiplash Reforms being implemented, only a fraction of claims had psychological damage whereas now it features in 60%+ of claims that are being made.

This changing nature of fraud has always been a common trend, and this is further implied from the latest ABI fraud statistics with the rise in value of property frauds, which rose £134m and up 8% from the previous year.

With the cost-of-living crisis, and with the advent of new technical capabilities in the market – insurers need to be constantly adapting to new changes and modus operandi through efficient use of technology. The ABI itself highlighted an increase in opportunistic fraud of 2% demonstrating that unfortunately individuals previously unknown to the insurer may attempt to make fraudulent claims due to economic circumstances.

AI is seen as the silver bullet but without better context, using the data more efficiently and enabling investigators more, fraud will just get displaced into other areas of business which without identifying as soon as possible will cause even more challenges for insurers down the road.

Read here about how poor data quality can hurt the insurance industry's ability to detect and prevent fraud.

Areefih_Ghaith

I wonder how AI is also being used to inflate these claims too, e.g. through tampering or creation of fake images or GenAI being used to help fraudsters problem solve and beat the systems

Angel_Allianz

While part of the rise in value could be due to claims inflation I am wondering about the decline in numbers detected as the economic situation suggest the opposite. It could be that fraudsters using new technology get more claims to be recognized as genuine and at the same time boost the value per claim as Areefih said. It's a concerning trend.

Shyam_Bhatt

Good points @Areefih_Ghaith @Angel_Allianz - I think the key term in the ABI stats is "detected" claims. When we speak to the insurers in the market, there is a concern especially relating to fraudsters utilising new technologies or chancing their arm because of economic hardship - the numbers don't imply that and therefore we should not be seeing these statistics as complete validation that fraud is reducing when there may be more factors in play.