Insurers turn to lie detectors

Insurance companies are turning to technology in a multi-million pound fightback against fraud. Wrongful claims cost insurers about £3bn a year and now companies are investing in industry-wide IT systems that analyse data to detect patterns in the claims submitted.

Other insurers are turning to lie-detector systems and psychological analysis to uncover when policyholders aren’t telling the truth.

Motor insurance is the most fraud-ridden sector of the industry. Claimants who make a living submit details of accidents that never happened and others who routinely stage phoney accidents involving innocent members of the public are now the focus for investigation.

According to the Association of British Insurers, improvements to the industry’s motor insurance anti fraud and theft register will make it easier for insurers to identify the most common motor insurance scams.

Increased use of the database register will enable insurers to uncover patterns of claims and multiple claimants as well as uncovering other statistical anomalies that indicate a problem.

Jo Dagustun, the ABI’s head of motor insurance, says: ‘The improved database will be an integral part of the industry’s battle to reduce fraud, so protecting honest policyholders.’

The most common types of fraud are where owners insurer their vehicle with several companies and then make multiple claims for total loss from each of them.

But staged accidents are a growing problem. The spokesman for one of Britain’s leading insurers declined to go into detail for fear of giving away trade secrets to would-be fraudsters, but added: ‘In the past these people could get away with it by using the names of friends, neighbours, relatives and so on. But our systems are sophisticated enough now to pick up these patterns.

‘There are, for instance, specific postcodes in the North-West where the incidence of claims is way out of proportion. We investigate all statistical anomalies because in our experience there is usually a reason for them, it just isn’t a matter of chance.’

Developments to the anti-fraud register are being overseen by vehicle information company HPI and the new system is expected to be fully operational by the summer.

But voice-recognition software and new psychological techniques are being employed by other insurers.

After Admiral began using lie detectors that detect the stress in callers’ voices, a quarter of policyholders withdrew claims that their vehicle had been stolen.

Elsewhere, online insurer Esure has installed voice stress analysis technology to spot possible problems.

Esure says the system is being used initially to investigate cases of stolen vehicles but that suspected staged accidents will also be examined closely.

Other firms already use the technology widely. HBOS announced last summer that it would begin trialling the technology. Lie detection will be used on only a few hundred HBOS claimants to see how effective it is, and customers will be informed if they are part of the trial.

An HBOS spokesman said: ‘It won’t be used in isolation. Policyholders with honest claims have nothing to fear.’

This article by Guy Dresser was originally published by This is Money on 28 March 2004.