- The name of the game in fighting insurance fraud with the ICB
By Annalise Kempen
Photos courtesy of the Insurance Crime Bureau (ICB)
For many consumers, short-term insurance is a grudge expense, until that day when they are involved in a vehicle accident or they return home from work or holiday to find that they have been the victim of a burglary and they need to register a claim with their insurer. But these days when we think about insurance, we should also think about how criminals are devising ways to defraud the industry.
On 21 and 22 February 2018, the Insurance Crime Bureau (ICB) hosted its second conference in Midrand, entitled “Organised disruption”, looking at ways in which the insurance industry and involved parties can significantly disrupt syndicated criminal activities through common efforts and partnerships. The thought-provoking presentations by industry specialists led to many interesting discussions and questions being asked. These not only included case studies and showcasing the ingenious ways in which criminals are trying to defraud the industry (ultimately impacting on consumers). Some presenters also discussed the importance of employing staff in the industry whose integrity was beyond reproach to ensure that criminals themselves don’t infiltrate the industry.
Since no conference report would ever be able to be a true reflection of everything that happened at a conference, we will therefore only point out some of the highlights during the conference.
The conference started off on a high note when Angela Mhlanga, the CEO of Hollard Partner Solutions, spoke about the importance of developing people in order to grow South Africa. She noted how unemployment has increased since 2014, and that the gross domestic product has recorded low growth rates. As a related consequence, about 30% or more than 17 million South Africans are dependent on social grants - something South Africa could no longer afford. Angela noted that people development was necessary for a large group of people to no longer depend on social grants. She also reminded the delegates that they were part of an industry which has to deal with the consequences and outcomes of our high crime rates, which could also be linked to a lack of people development. Angela noted the importance of developing our people in order to get them to be employable or become entrepreneurs. The added benefits of having people developed include that they will enjoy employment and therefore be able to pay for education; their medical bills; food and housing and that they would not have to resort to crime to provide for their basic needs. Angela gave various examples of how individuals and companies could get involved in people development, such as by teaching them new skills like basic computer literacy or how to replace car parts. Hereafter they should be given a platform from where they could repeatedly practice those new skills as interns. Angela concluded by using examples of the work done by Harambee and the Jobs Fund and those interested in getting more ideas on how to "lend a hand" could get some inspiration by visiting www.jobsfund.org.za and www.harambee.co.za
The CEO of MiWay, René Otto, gave a thought-provoking presentation about organisational ethics and how their company drove a values-based culture in various ways. One of these was by regularly awarding a (real) samurai sword to the individual staff member who set the best example of the company's values-based culture. Nominations and motivations for this award are done by peers and as a qualifying criteria, the nominations have to address all four of MiWay’s values namely freedom, attitude, energy and accountability and showcase how that employee had fulfilled them. René quoted interesting research about employees’ ethics that showed that 20% of employees have indicated that they will never steal from their company; 60% indicated that they will not steal unless they were presented with an opportunity; while 20% of employees were thinking of ways to steal from their employers all the time, ie by exaggerating travel claims. These statistics should give all employers sleepless nights.
However, these statistics do not have to be a reflection of your company if a values-based culture was entrenched and employees knew that they have to do the right thing all the time, and also knew what the right thing was. René said that MiWay has adopted a zero tolerance attitude towards non-compliance with their values-based culture, especially regarding dishonesty and a lack of accountability. The reasons were simple: if employees were dishonest, it led to a lack of trust; a lack of trust led to a permanent breakdown of employer-employee relationships and ultimately necessitates that a bad apple needs to be removed before s/he contaminated the rest of the box. Ultimately, it is not important what an employee tells you about him-/herself during an interview, but how they behave - do their words and behaviour match?
On a technical level, David Hartley from the SAS Institute explained during his presentation how technology is used to identify, track and combat syndicated crime. That was done after he had sketched a background of the extent of insurance fraud in different parts of the world. For example, in Britain it was estimated that undetected fraud costs insurers £3 billion (R48 billion) a year; in Switzerland it is estimated that 10% of claims are fraudulent; the United States estimates losses of as much as $80 billion per year due to insurance fraud; while a survey conducted in Finland in 2014 showed that 19% of respondents said that they knew a person “who has deceived his/her insurance company”. The question is how do insurance companies detect and prevent potential fraud? From David’s presentation it was clear that analytical software can play a vital role in detecting fraud and that data can be used to find unexplained anomalies. David noted that such analytical software allows for swifter decisions in terms of further investigations and ultimately in more efficient investigations. In Turkey for example, using analytical software has resulted in a 66% increase in fraud detection. It therefore makes sense that insurance companies use these types of tools to detect and prevent fraud.