A forest fire is spreading. Not far from there, a house also goes up in flames. The owner wants to claim the damage from his insurer. But the man is not the victim of the natural disaster but wanted to take the opportunity to cheat his insurer. That’s why he set his house on fire himself. The attempt was blown because a drone had filmed the man doing it.
Andrew Enochs from Dutch fraud detection specialist Friss reports on the case. Friss has specialized in fraud detection for insurers worldwide. Cases like that of the arsonist are common. “We all know that fraud is extremely common in the face of disasters,” says Enochs. The General Association of German Insurers (GDV) also warned in August 2020: “German insurers fear that the economic consequences of the corona pandemic will lead to more attempts at fraud.”
Friss has now analyzed his data from the past two years to find out how the uncertain situation since the corona pandemic has really affected attempts at insurance fraud: Contrary to expectations, the proportion of fraud cases actually fell during the pandemic.
As governments around the world relaxed the measures, the number of reported claims rose again. However, the number of cases of fraud and suspected cases continued to fall – even to a lower level than before the pandemic. In 2020, 18 percent of claims were suspected of fraud, in 2022 only 16 percent.
In the home office, the verification is more difficult
Friss has a very broad definition of the term fraud. Anyone who estimates an incorrect value for stolen items after a burglary, perhaps because they actually no longer had the number to hand, is therefore already an insurance fraudster. For years, the GDV has been assuming a fraud rate of ten percent in Germany.
Friss sees two possible reasons for the development towards fewer cases of fraud: either there have been fewer frauds since then, or the fraudsters are more skilful. The company leans towards the second possibility, that insurers have fallen prey to scammers more often. This is probably due to the fact that companies have changed the way they work. The investigative units were often relocated to a virtual environment, with the specialists working from home.
Working from home does not help with fraud investigations, because the close personal exchange between experienced experts is the first line of defense against fraudsters for many companies. Virtually, suspected cases can be processed faster and cheaper, but the teams can investigate the cases less effectively, believe the experts at Friss. What is certain, however, is that the number of deceptions that have been uncovered has been relatively low for more than two years. The move into the virtual world was one of the biggest changes in fraud prevention in recent years.
At the same time, scammers are also evolving their methods. It was the same at the beginning of the corona pandemic. At that time, for example, a customer tried to get a car interior cleaning from the insurer. The reason: The car was infected by the virus.
According to Friss, three factors lead to someone becoming a scammer. One of them is opportunity. “Scammers always choose the path that offers the best opportunity and the least risk,” the study said. Other factors include the feeling of being right and the pressure someone is under. For many, insurance fraud is not or hardly morally reprehensible.
The most common fraud attempts relate to damage to mobile phones, fake or exaggerated burglary damage and misrepresentation of facts that led to the damage. Some injured parties also like to raise the value of the insured items and conceal previous damage.
Sometimes the insurance clerk also helps with fraud
There are also unusual attempts at fraud. A classic are the fake deaths, mostly in life insurance. Friss reports on a macabre stalking case in which a man took out funeral insurance for his ex-wife. And again and again: insurance intermediaries cheat themselves or help customers to cheat, because they hope this will give them better sales opportunities for further contracts.
Friss reports several cases in which people intentionally harm themselves “for example by cutting off a finger” in order to make claims against insurers.
The criminal energy is enormous: A US court recently sentenced a 34-year-old to five years in prison for identity theft and insurance fraud. The man had stolen almost half a million dollars by applying for unemployment insurance money and additional benefits from a Covid 19 aid program in three different states under a false name. He had the money paid out on prepaid cards and flew to California to withdraw the loot as cash within a week. The authorities, including the Secret Service, investigated for two years until they were able to confront the man.
The pandemic gave scammers a chance to try new strategies on digital channels. Scientists from the University of Portsmouth have found that the number of cyber frauds related to Corona has increased by 400 percent. Friss analysts conclude that this indicates that fraudsters may have reoriented themselves and become more adept at their actions.