Pete Ward on how we’re tackling insurance fraud

Mark Colegate: Pete Ward is Head of Claims Counter Fraud at Aviva, and he joins me now. Pete, just to set things in context. How big a problem is fraud when it comes to the insurance industry today, in the round?

Pete Ward: Thanks, Mark. It's great to be with you. So unfortunately, fraud continues to be a real issue for insurers. To put it into context, it costs the insurance industry well over £1 billion a year, and that's a conservative estimate because it doesn't account for undetected fraud. We know that fraud accounts for 41% of all reported crime in the UK, yet it receives less than 1% of police resources allocated to its investigation. From Aviva's perspective, in 2024, we detected £127 million worth of fraud savings purely on claims, and that doesn't include all the policy fraud and the fraud prevention stats which go on top. And I think these numbers really sharpen the focus as to why fraud remains a real issue for insurers, Aviva included. It's precisely because of that that we've invested heavily in our counter fraud capability over the last few years, from a people perspective, but also technology, so that we've got really robust fraud controls in place to help us detect fraud.

Mark Colegate: When you talk about this rise in fraud, is that because you're getting better at detecting it, you said you've invested a lot more, or is it because there's more about? We hear things like there's a cost of living crisis.

Pete Ward: It's a great question, and it's an element of both. So history reminds us that it's often a correlation between times of economic hardship and a rise in fraud, and it's precisely because of that that we, a couple of years ago, took the conscious decision to really invest in our people and our technology. So from a people perspective, we've invested in their training, in their development, and from a technology angle, we've invested in advanced analytics, machine learning models, to help us really detect fraud as much as possible where it exists. I think optimum fraud detection models require a nice balance of human capability and also technology.

Mark Colegate: So where are some of the areas where you're seeing a particular growth in fraud at the moment?

Pete Ward: So we've seen a huge rise in what I would call opportunistic fraud, and by that, I mean where there is a genuine claim of some description, but there's such exaggeration that it taints all or part of the overall claim. If I'm to break that down into different lines of business, from a motor non-injury perspective, we've seen a rise in fraud arising from vehicle damage, from credit hire, from loss of use. In fact, we've seen over a 200% increase in those fraud areas since 2021. From an injury perspective, the whiplash reforms have undoubtedly had an impact in terms of frequency of those deliberate cash-for-crash scams. But what we are seeing is a rise in what I would call non-whiplash injuries and the implausibility of those injuries. So an example would be, we've seen recently a claimant claiming for a bruised ankle due to excessive braking, but they were a passenger, and we're not talking about a dual car control here, Mark. And then from a household and commercial property perspective, we've seen an exaggeration, particularly in the contents space. In commercial property, we've seen an 89% increase in fraud detection volumes, and in both areas, we've seen an element of cost layering from a small number of loss assessors. I'm at pains to say that not all, I'm not suggesting that all loss assessors are bad actors, but we've certainly seen some questionable behaviour from a small number of actors in that space.

Mark Colegate: You describe a world which moves from exaggeration to outright fraud, and I guess it's probably a little bit grey where the two overlap, but are there any negatives to being caught perpetrating this? What do you do, do you just sort of refuse the claim and say sorry, or do you get the police involved? What are the penalties for pushing it when it comes to insurance claims?

Pete Ward: So there can be some very serious consequences of committing fraud. At an industry level, there is something called the Insurance Fraud Register. That houses details of all proven fraudsters. So if you are on that register, fraudsters will find it more difficult to obtain products such as insurance, mortgages, and loans, and it can affect their credit rating. But we work very closely at Aviva, with law enforcement agencies, and we will pursue criminal sanctions where appropriate. So in 2024, working with, in particular, IFED, which is the Insurance Fraud Enforcement Department, an arm of the City of London Police, we secured custodial sentences for 10 individuals that defrauded Aviva and our customers. We also secured suspended sentences for a further 11 individuals who had perpetrated fraud against Aviva, and we also very recently secured something called a serious crime prevention order against a fraudster who deliberately targeted Aviva and our customers, and that placed quite draconian restrictions on the fraudster and their lifestyle, and if they breach any of those restrictions, it is an automatic custodial sentence. So in summary, fraud is not a victimless crime, and there can be quite serious consequences to committing insurance fraud.

Mark Colegate: You've mentioned opportunistic crime, but what are some of the other trends that you will see?

Pete Ward: So two of the trends which I would point out are ghost broking and paid ad spoofing. Both areas have been around for a number of years, but due to the increasing sophisticated nature of both, it's biting victims unfortunately harder than they've ever done before.

Mark Colegate: And can you dig into a little more detail on how ghost broking and paid ad spoofing operate?

Pete Ward: Sure. So ghost broking is the activity of fraudsters posing as insurance brokers, selling fake or invalid insurance online. They primarily target young drivers on social media, offering what looks like super cheap car insurance, but ultimately it's a worthless product because there's no valid insurance at the end of the transaction, and unfortunately, that exposes victims to driving around without valid insurance. That gives them liability for potential fines, conviction notices, and even in some instances, confiscation of their vehicle. And paid ad spoofing, on the other hand, is the activity of some unscrupulous companies paying for online search engine adverts that insinuate that they are associated with a trusted insurer when they're not, and their aim is to capture the claim for their own financial benefits, and victims will incur liability for credit hire, for storage, for recovery. And it's very easy to see how victims fall foul of this malign practice. So if you've been involved in a road traffic accident and you don't have your insurer's details to hand, it's natural to look for these on your phone, and very often, the first few results which come back on a search engine will look genuine, they will use generic sounding terms, but at the point which you call the number that's provided, you're then put through to an accident management company who then captures the claim, and the liability starts. Now I'm at pains to say that not all accident management companies are bad actors, but those ones that insinuate they are associated with a trusted insurer, or are an insurer, are frankly very harmful.

Mark Colegate: And is there anything else that Aviva is doing at the moment to take the initiative and get ahead of fraud, and to support brokers and their clients?

Pete Ward: Sure. So we've already alluded to we're investing heavily in our people and our technology, so we've got robust controls in place. We're also working collaboratively with the Insurance Fraud Bureau on awareness campaigns to tackle paid ad spoofing and ghost broking, and where appropriate, we share data with our industry peers. But my message to brokers would be, if ever you're unsure around any fraudulent claim, or you believe that your client has been subjected to a fraudulent claim, please do get in touch, we're here to help.

Mark Colegate: Pete Ward, thank you.

Pete Ward: Thank you.