The Motor Insurance Database (MID) was established
to stamp out uninsured driving in the UK, a problem that costs
the insurance industry an estimated £400m per year.
One year on, the question that every insurer, broker and motor
policyholder wants answered is: "Is the database working?"
At this stage, there are few statistics on how
many uninsured drivers have been caught and prosecuted, or
on whether the MID has actually slowed the rate of increase
of motor insurance premiums.
But there is unanimous approval of the database
from the insurance industry and initial reports suggest that
it is having an impact on the problem.
Cunningham Lindsey head of motor investigations
Peter Taylor, a former police officer and an insurance investigator
of 15 years, says he is confident that the MID will be worthwhile.
"I've seen it having practical successes
in day-to-day investigations... you do tend to find that if
a project isn't successful, it is dropped fairly quickly because
people see that there isn't a benefit from it."
The Motor Insurers' Information Centre (MIIC),
which was established by the insurance industry to develop
and manage the MID, says that on average, the police access
it more than 20,000 times a day.
The centre also estimates that because the database
will reduce uninsured driving by forcing people to start insuring
their vehicles legitimately, the motor insurers will increase
their annual premium income by between £25m and £50m.
This dwarfs the database's £2m set-up costs and its
£1m annual running costs.
Further savings are expected to come from a
drop in the levy that each insurer pays to the central Guarantee
Fund, which is used to pay claims caused by uninsured drivers.
And because the MID provides quick and accurate
vehicle insurance information, the cost and time involved
in claims handling are cut.
The MID is considered to be a great step forward
for co-operation within the insurance industry. Not only have
all the motor insurers contributed to the costs of developing
the database, they are also all continuously playing their
part in sharing information to reduce costs, cut fraud and
pull motor premiums down.
Royal & SunAlliance (R&SA) regional
fraud manager Karen Berrington says that any data sharing
is an effective and useful tool to combat fraud because it
protects honest customers.
"We are working very closely with other
companies, and the Association of British Insurers (ABI),
to combat fraud, and the use of a number of different databases
helps us do that."
Apart from the MID, other databases that many
insurers subscribe to include the Claims and Underwriting
Exchange (Cue), the Motor Insurers' Anti-Fraud and Theft Register
(MIAFTR), Hunter and the Credit Industry Fraud Avoidance System
(CIFAS).
Berrington explains that all the databases exchange
information to check and compare data to identify anomalies.
This means the insurers can begin to get a clearer
picture of who is defrauding them and how often it is happening.
It also allows them to build a better case against fraudster
- the type of case that could lead to a prosecution.
Allianz Cornhill claims fraud controller Mihir
Pandya says that, in the past, insurance companies saw the
non-payment of a fraudulent claim as a victory, but they should
have been pursuing the fraudster to prevent him from trying
the same trick again.
"Being satisfied by not paying sends the
wrong message to the fraudster," he says.
"One problem is that people don't perceive
insurance fraud as a serious crime.
"People say the punishments aren't stiff
enough but I think the judiciary looks at us and says: `Sort
yourselves out first and then we can look at it.'"
He adds: "We need to show the courts that,
as an industry, we can attack fraud in a way that's cohesive
and focused. It's a two-way process."
Cunningham Lindsey's Peter Taylor agrees: "It's
a constant process of trying to make the courts aware of the
seriousness of fraud."
However, he says that since the industry has
started to work with the police through initiatives like the
MID, he has noticed sentences becoming harsher and more common.
"So it is toughening up," he says.
"I am seeing the net closing on fraud."
Fighting fraud - other tactics
Uninsured driving is just one of several types of fraud. The
insurance industry has to watch out for chancers when claims
are made and when they are issuing an insurance policy.
Allianz Cornhill claims fraud controller Mihir
Pandya says it is important for every insurer to dedicate
specific resources to the fight.
"Cornhill is starting to put a fraud specialist
in each branch now... you need to have individuals with very
specific expertise," he says.
"That is purely because of the emergence
of frauds such as `staged accident fraud' [accidents arranged
between willing parties]."
He adds that fraud awareness needs to be spread
across an organisation, from the chief executive, who coordinates
an anti-fraud strategy, to the mail handlers in post room.
"We're even publishing [our successes in] fraud newsletters."
Apart from databases and company-wide awareness,
insurers are starting to use more sophisticated fraud identification
techniques in their processes. One company that supplies the
latest antifraud technology is Cambridge-based Ncorp. Its
technology identifies patterns within information that distinguish
honest customers from fraudulent ones.
For example, telephone operators use it to assess
responses from claimants. The technology can pick up pieces
of data that could indicate a fraudulent claim. This spurs
extra claim investigation.
Ncorp chief executive officer Nick Bidmead says:
"Our technology was originally developed at Cambridge
University. It's a very powerful mathematical engine for detecting
patterns of behaviour."
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