Motor fraud on the rise “in anticipation of whiplash reforms”

Stockdale: Fraud systems need to up their game

An increase in motor insurance fraud may be related to next year’s whiplash reforms, the Association of British Insurers (ABI) has suggested.

A survey of its members found that they uncovered 107,000 fraudulent insurance claims, a rise of 5%, worth £1.2bn in 2019.

Motor insurance fraud remained the most common, with a 6% increase in detected cases, albeit their value, at £605m, fell slightly.

Around 75% of fraudulent motor claims contained a personal injury element, the ABI said: “This may reflect some fraudulent activity ahead of the introduction of personal injury reforms in April next year.”

Among the examples it gave were a police officer convicted for a motor fraud valued at £10,000 after he was incriminated by his own dashcam footage, which showed that debris from a passing van that was alleged to have caused him personal injury and damage to his car was actually polystyrene.

Meanwhile, a two-year collaboration between leading insurance law firm Kennedys and Manchester University has concluded with the implementation of “next-generation” fraud prevention software that the firm said was contributing to “significant new revenues”.

The knowledge transfer partnership (KTP), backed by funding from Innovate UK, has developed software that supports insurance claims handling using modern machine learning, data analytics techniques, semantic technologies, intelligent modelling methodologies and decision support systems.

Kennedys has now extended this into a separately funded project with an ambition that goes beyond fraud to also encompass the automation of all claim outcomes, such as the liability decision, decisions around offer strategy and claim valuation.

The firm said this has all allowed it “to advise much deeper into its insurer clients’ businesses”, generating at least £15m of new revenue in the UK alone last year and also win funding for another project looking at how machine intelligence can be used to read insurance policies and automatically evaluate them for coverage.

Dr Xi Liu, who joined Kennedys as part of the KTP in 2018, is staying on as a data scientist.

The KTP allowed the university’s Decision and Cognitive Sciences Research Centre to apply its evidential reasoning theory to fraud detection and to demonstrate its impact in the legal and insurance sectors.

The project also showcased its potential as a general theory to develop explainable artificial intelligence tools in many other sectors.

Martin Stockdale, head of fraud at Kennedys, said: “As fraud continues to become more sophisticated, fraud systems also need to up their game. This KTP has been critical in helping us take automated fraud detection across the industry to the next level.”

Last year, Kennedys entered into its second KTP with University College London, again supported by Innovate UK, to develop an emerging risk analytical tool for insurers.

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