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Insurance Claims Fraud in a COVID-19 Environment

As a result of the current challenging economic times due to the COVID-19 pandemic, the insurance industry is experiencing a significant increase in fraudulent insurance claims.

Global crime statistics and fraud intelligence, as well as Chubb’s own investigations data, indicate an increase in  fraud risk across all lines of business, but especially in the SME insurance environment.

Chubb’s Special Investigations Unit (SIU) Manager for Australia & New Zealand, Kevin Walsh [EM3]  significant importance on educating all Chubb claims and underwriting staff on what to look out for in order to detect insurance fraud.

“Insurance fraud brings with it an obvious financial detriment to the insurer. The most critical component of our internal counter fraud claims strategy lies within fraud education, which includes sharing case studies with the team and examining trends.” He said.

 

Major decrease in crime during the COVID-19 pandemic (except fraud)

Despite the significant increase in fraudulent insurance claims during the COVID-19 pandemic, there has been a decrease in crime across many other categories. The NSW Bureau of Crime Statistics and Research found that in April 2020, crime rates declined (relative to the previous five years) as follows:  

  • robberies (down 42%)
  • non-domestic assault (down 39%)
  • sexual offences (down 32%)
  • break and enter of dwellings (down 29%)
  • break and enter of non-dwellings (down 25%)
  • stealing from motor vehicles (down 34%)
  • car theft (down 24%)

A similar pattern was noticeable in Queensland. When comparing crime data for April 2020 to the same month in 2019, with a 28% decline in unlawful entry of dwellings, a 45% reduction in robberies and a 7% drop in sexual offences. 

Other countries reported similar decreases in crime. In England and Wales, crime dropped consistently by an average of 24% per month over a three-month period from April to June 2020 compared to the same period for 2019.

However, not all crimes are decreasing during the pandemic. In March 2020, reported insurance fraud in the UK increased by 400%.

Kevin believes a mixture of factors are contributing to the increase: “Besides the issue of individuals and businesses being under financial stress, there is also a belief that insurance fraud is a victimless crime, and insurers are easy targets.” He said.  

A recent survey by the Association of Certified Fraud Examiners stated that 93% of anti-fraud professionals anticipate an increase in fraud in the next year, with more than half of respondents predicting a significant increase.

Some of the recent trends experienced by Chubb SIU in the SME environment, which warrant further investigation, include the following scenarios: 

  • The late notification of multiple claims for incidents that allegedly occurred pre COVID-19, having been lodged late on the basis the insured did not previously have time to prepare the claims.
  • Burglaries where the business’ CCTV and alarm systems were allegedly accidentally switched off, and the entire stock was allegedly stolen.
  • A major increase in the submission of fake proof of ownership documents and receipts.
  • Claims where the insured’s entire schedule of insured items were allegedly stolen from their vehicle whilst parked in the street overnight. 
Summary:


Chubb’s data, along with various other sources, indicates an increase in fraudulent claims being lodged with Chubb. 

In the SME space alone, Chubb’s SIU has seen an increase of 30% in the money saved from fraudulent claims [PG1] so far in 2020.

“It is apparent that insurance fraudsters now have the financial motive, technological knowledge and, just as importantly, the time, to prepare sophisticated insurance fraud claims,” Kevin said

 “Chubb’s SIU is working closely with the Data Analytics and IT teams to enhance our detection capabilities, including purchasing new industry standard fraud detection software.”

Chubb SIU reports all insurance frauds that are detected to the police and support any police prosecution.

Kevin notes that majority of insurance claims lodged with Chubb are legitimate claims, but stresses the importance of maintaining claims vigilance.


“The deterrent effect of Chubb not paying fraudulent claims is vitally important.” He said.

Sources:

https://www.acfe.com/uploadedFiles/ACFE_Website/Content/resources/Covid-19-Benchmarking-Report.pdf

https://theconversation.com/some-crimes-have-seen-drastic-decreases-during-coronavirus-but-not-homicides-in-the-us-142718

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