Fighting Insurance Fraud Effectively by Aligning Underwriting and Claims

Annemieke Smith is Head of the Fraud & Integrity department at Reaal Insurance. After years of experience at the Claims department, her focus now is to protect Reaal against (potential) fraudsters. They have improved their fight against insurance fraud by aligning underwriting and claims. Norms and values form the basis of a healthy insurance portfolio; they are the (unwritten) rules that define the responsibility of both the insurer and the insured. Take the balance between risk, insurance premium and payout. We call it dishonest if someone does not abide by the rules. Whether it concerns setting fire to one’s own shop because business is going badly, or a father taking out car insurance in his own name for the Golf GTI of his 19-year-old son who has just acquired his driving license. It is tempting, considering the difference in premium. However, that difference also applies to the risks that need to be covered.

Fraud awareness

It is not always possible to prevent fraud, but I am convinced that greater fraud awareness can make a huge difference. So that is what we have focused on over the past years at Reaal. Traditionally the departments Underwriting and Claims operate separately from each other to avoid potential conflicting interests. An excellent principle, but there are some drawbacks. It pays off to be alert to possible inconsistencies in a policy application. This improves the risk assessment at underwriting. Who is the actual owner and who is the main driver of a car? What is the history of a shop premises; does the present owner have connections with the previous owner who went bankrupt? Are there other reasons for taking out property insurance than just covering fire? Have the business results been bad or has there been a bankruptcy in the past? All these signals are not directly reasons to refuse an insurance policy. The signals should at least lead to a realistic risk assessment with the appropriate premium. Also, when a claim is filed, the questionable points in the story can be checked more easily.

Cooperation Underwriting and Claims

There are two important reasons why our colleagues from the departments Underwriting and Claims should work closer together. Firstly, we have shifted our focus from fraud detection to fraud prevention. This requires greater fraud awareness from the colleagues at Underwriting. Therefore, on a monthly basis, we share several examples of fraud that we have come across in our investigations. It usually concerns large premeditated cases, such as arson. We also discuss cases that fall under a somewhat ‘grayer’ area, such as including earlier parking damage in a claim following a collision, or stating that an iPad slid off the kitchen table while it was actually dropped outside. By sharing these examples, the staff gets a realistic idea of fraud and thus gains insight into how they can contribute to its prevention.

Cooperation between underwriting and claims is crucial to fight claims fraud

The second reason for more cooperation is the procedure for dealing with cases where fraud has been proved. Not only is the claim rejected and registered at the Dutch Association of Insurers. The relationship with the client is terminated as well. This last measure calls for the expertise of Underwriting: they know the policies, the terms and the rules for termination. In collaboration with Claims, a plan of action is made, taking into account the severity of the fraud. Then one single letter is sent out to the client. It contains all the details about the rejection and the registration of the claim, and the termination of the relationship. Currently, Reaal has separate departments for Underwriting and Claims. In the near future, these will be replaced by departments per product. But whatever organogram you choose, I believe cooperation is crucial for optimal fraud prevention. It enhances the profitability of the insurances and raises the fraud awareness of the entire company to a higher level. We see this as an important result of the 1,5 year that we have been working in this manner.