Industry use of behavioural science to tackle insurance fraud

Behavioural-science-to tackle-insurance-fraud

An industry working group, tasked with developing a communications strategy to combat insurance fraud, has appointed behavioural experts to carry out experimental research into the impact different approaches could have on fraud levels.

The work will target opportunistic fraud in personal general insurance lines and the research will explore how changes to various parts of the customer journey could positively change customer behaviour. It will also assess the potential impact of a public attitude campaign.

Opportunistic fraud includes the provision of false information at application stage and exaggeration of genuine claims. It is believed to account for a significant majority of the total value of undetected fraud which could cost the industry as much as £2 billion. Tackling this type of fraud has been a long-standing challenge to the industry and forms one of the key recommendations of the Government’s Insurance Fraud Taskforce (IFT) report.

One of the many complex challenges faced by the industry is identifying ways of interrupting dishonest behaviour, or inadvertent mistakes, while reassuring honest customers and avoiding any barriers to the timely payment of legitimate claims.

Behavioural experts, Decision Technology, were appointed for their innovative approach to running trials within a simulated environment which provides a safe space for testing multiple interventions without disrupting live insurer processes or customers.

The industry has never done this type of research before. Test results should enable the relative commercial impacts of each intervention to be measured across different insurance products and lifecycle stages.

Recommendations for the long-term approach to addressing the problem will be drawn from the results and presented to the industry in the first half of 2018.

David Hertzell, Chair of the Insurance Fraud Taskforce said “Tackling opportunistic fraud requires significant and sustained behaviour change which presents immense challenges. It is impossible to accurately measure whether or not an opportunistic activity has been prevented; finding ways to measure how effective individual techniques can be is therefore vitally important. I am looking forward to seeing the results and how they may be put into practice.”

Amanda Blanc, Chair of the Insurance Fraud Bureau and Group CEO AXA UK and Ireland said “Introducing interventions into the customer journey is an area where we need to tread very carefully. Consumer trust is fragile and we know that the vast majority of insurance customers are honest. However, it is important that we find a way to reduce the cost of fraud which ultimately impacts the premiums that those honest customers pay. This piece of work is an exciting step forward in helping to identify and measure where we can have the greatest impact.”