The Insurance Council of New Zealand (ICNZ) has launched a new Insurance Fraud Bureau (IFB) to crack down on fraudulent activity that it estimates costs the industry as much as $614 million a year.
And while it won’t have the legal power to prosecute offenders, it will give insurance providers a new channel to share data and cooperate.
A white paper from ICNZ, which was released as part of the IFB announcement, outlines the rationale behind establishing the new agency. ICNZ is the insurance industry body whose members consist of insurance companies.
“Insurance fraud continues to plague the general insurance sector despite the number of initiatives to curb it. Greater effort needs to be made to educate the public around insurance fraud issues and reduce instances of insurance fraud.
“ICNZ is building on the above initiatives by developing the IFB to take fraud prevention to a new level involving scale, technology, relationships and a specific brand to provide a pan-industry approach to combating insurance fraud.”
It says the IFB is like similar organisations established in the United Kingdom and Australia, with the sole purpose of reducing insurance fraud, and is designed to allow otherwise-competing organisations the chance to share information and collaborate.
ICNZ says previous attempts to tackle insurance fraud in New Zealand haven’t been coordinated across the industry.
“The IFB will change that. All ICNZ’s members are members of the IFB, which means that for the first time, general insurers in New Zealand will be working together to reduce the impact of insurance fraud on all customers.”
The ICNZ discussion document defines fraud as wrongful or criminal deception intended to result in financial or personal gain.
The New Zealand experience
“It could be argued that fraud detection and prosecution in New Zealand is not taken particularly seriously. It is perceived as a white-collar crime that has a white-collar (i.e., soft) punishment for those found guilty.”
It says the moral ambiguity surrounding some types of fraud is exacerbated by the short sentences handed out to offenders. It says this sends a message to society that these people are somehow different from the common criminal. The end result is it tends to decriminalise fraud in the eyes of the public.
ICNZ chief executive Tim Grafton says one of the main tasks for the IFB will be educating the public about insurance fraud.
“At ICNZ we provide comments and advice on a whole range of different insurance issues. But we felt that that education role would be more effective if it was driven by an organisation called the Insurance Fraud Bureau.”
Grafton says it may give members a new channel to take legal action against offenders.
“At the hard fraud end we might see more prosecutions,” he says.
But he says insurance companies have a number of options on hand to deal with fraud that doesn’t involve legal action, ranging from denying claims, to cancelling policies.
“Our message is, particularly to people who are thinking they might over egg their claim, we want to make people aware that they are cheating everybody else and it’s a cost on everybody. It is a very, very small minority who do this, but they create a cost for everybody else as a collective.”