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The Evolving Fraudster

DWF hosted its annual National Fraud Conference last month and welcomed more than 90 delegates to its London office. National Fraud Head, Lorraine Carolan introduced the 10 DWF speakers, who covered a wide and varied range of topics and looked at how fraud was evolving and shifting. Miles Hepworth looks back at the event and some of the key themes.

Cybercrime and cyberenabled crime - Elizabeth Rhodes provided an insight into the extent of cybercrime and cyber enabled crime. With nearly 20% of spam emails finding their way into corporate accounts, despite filters being in place to stop them, nefarious emails sent with the purpose of eliciting disclosure of data, pose a very real threat of data theft, potentially leading to extortion, corporate identity theft, and reputational damage. The speaker focused on the need for effective and adaptable procedures to tackle the evolving nature of this type of crime though education, the sharing of best practice and the need to act quickly in the event of an attack.

How the reforms announced in the Autumn Statement could impact upon fraud – whilst implementation of the reforms are some way off, James Pinder and Paul Holmes considered what impact a rise in the Small Claims Track limit and a restriction on compensation for minor whiplash injuries might have on fraud and what the unintended consequences of the reforms might be. If the reforms are not executed properly, then the concern is that might lead to claims inflation in whiplash claims (and generally) and more fraud spilling over into the EL and PL claims arenas, especially if any increase in the SCT limit is not “cross class”. Any increase in the SCT limit may also lead to a rise in dubious, unregulated McKenzie friends and the increased involvement of CMCs. With the outcome of the Brady Review announced on the day of the conference, the Review pointed out that the IFB reported that some criminal gangs were using CMCs as a means to legitimise their activities.

The emergence of fraud in Scotland – Scotland casualty and general insurance head, Andrew Lothian and Intel Lead, Lisa Sanzeri warned the audience that, whilst there has always been fraud in Scotland, it is becoming more prolific. In a jurisdiction with no CPR, an advantageous costs regime, and a current tolerance for referral fees, Scotland is fertile ground for those looking to pursue fraudulent claims and a limited experience in dealing with fraudulent claims means fraud is more likely to go undetected. Fraud claims practices, only previously seen in England and Wales are starting to appear in Scotland and the experience gained from fighting fraud in England and Wales will be essential in the fight against fraud in Scotland. The audience were treated to a DWF case study, where the hire company that featured in the claim was part of a wider fraud ring that DWF were investigating.

Fraud from an insurance regulatory perspectiveJeremy Irving, partner in the Corporate Insurance team, looked at the FCA and the PRA’s stance on fraud, including how fraud can be addressed as a risk factor under Solvency II, especially via structures, systems and controls to manage operational risk, legal risk and compliance risk. The audience were reminded of the scope for UK regulatory rules to protect both policyholders and third party claimants (“TPCs”), including the potential to class TPCs as ‘consumers’.

Telematics – Telematics Claims Service Lead, Jamie Taylor, looked at the use of telematics in combatting fraudulent claims and the tools required to interpret and convert raw telematics data into evidence and the challenges that insurers face in presenting that evidence. The benefits of telematics was highlighted when attendees were taken through a recent DWF case study, in which telematics data provided a link between several  different accidents and different insured parties, without there being any other apparent links between the parties. Telematics data established that the various ‘accidents’ had not occurred in the manner alleged and that the insured parties, who were apparently unconnected and did not know any of the claimants, had all visited the same Accident Management Company that the Claimants had utilised. Key to the successful defence, was having the ability and expertise to accurately interpret and prove the reliability of the telematics data. In future, telematics data will develop as cars become connected and telematics will move from a cost reduction tool to an income generating tool.

Driverless and autonomous cars – Automotive sector head, Caroline Coates looked to the future and the development of driverless and autonomous carsand what it means for the insurance industry. Where there are accidents involving driverless cars, will we see a shift in liability from driver to vehicle manufacturer: from a motor policy to a product liability policy? Whilst additional data collection is likely to aid response times and lead to a more joined up approach between various users and agencies, as well as leading to fewer staged accidents, will it in turn lead to opportunities for the “cyber criminal”. As ADAS advances, the hazards, such as hacking, increase and it is likely that we will see a new kind of “staged accident”, as hackers attempt to interfere with vehicle systems remotely, staging accidents, or interfering with the data after the event and selling that data to facilitate fraud.

Profiling – Claims management consultant, Jo Baker highlighted how looking at the past, could help in predicting the future. The introduction of the MOJ Portal in 2010 and its extension in 2013, had led to a push to maximise portal retention rates, supporting claimant business models and providing a fertile ground for fraudsters, with less investigation and fewer opportunities to validate claims. Similarly it might be said that the 2013 LASPO reforms have acted as a fraud enabler, with claims models appearing that provide for a deduction of the claimant damages and fuelling the growth of the fraudulent rehab model. The reforms mean that we are seeing a move into casualty fraud, fraudulent NIHL claims and fraud in medical claims for treatment costs.

Whilst fraud is always developing and moving, the claims market is particularly volatile at the moment, with a number of reforms ahead, both in respect of personal injury and CMCs, making the market particularly vulnerable to fraud. We will continue to monitor developments and keep you informed.


To find out more about the subjects discussed at the conference, please contact Lorraine Carolan on 0121 200 0485, or by email at lorraine.carolan@dwf.law

We are looking at fraud in the treatment supply chain at events, in Leeds on 12 May and in London on 25 May. Please contact jane.hamilton@dwf.law for further information.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.