- Almost three quarters of brokers say application fraud is not a priority for them.
- Application fraud /inaccuracies costs the industry over a £1bn per year according to SSP.
- The most successful brokers are more likely to see tackling fraud as a key driver of growth.
Almost three quarters of brokers have put fraud prevention on the back burner according to insurance technology solutions provider SSP. 74% of brokers, say application fraud is not a priority for their business over the next 12 months, with 65% saying the same about claims fraud.
The data, which comes from a survey of 301 UK brokers, suggests that even in the longer term neither commercial nor personal lines brokers plan to target fraud. 62% of surveyed brokers said that application fraud would not be a priority in the next five years and 60% said the same about claims fraud.
The news is concerning given that fraud is recognised as a huge problem for the insurance industry as a whole. SSP has estimated that fraudulent or inaccurate insurance applications in the motor insurance industry alone are costing insurers over £1bn a year1 in lost premiums, whilst the ABI detected £1.3bn of claims fraud in 20132.
Only the most successful small brokers in the UK3 appear to be bucking the trend. A sizeable proportion of brokers (39%) credit their efforts to get on top of application fraud as a contributing factor to their success. Growing brokers are also more than twice as likely as declining brokers to say that tackling fraud will help to drive their growth over the next five years.
Adrian Coupland, Managing Director, Data and Distribution at SSP, commented: “Many of the brokers we spoke to have a clear plan for growth, one which focused on providing an excellent service and investing in their insurer relationships. Yet some brokers still seem to accept fraud as a fact of life rather than tackle it, boost business performance and strengthen relationships with insurers.
“As more insurers use technology to improve their ability to detect and track fraud – including pre-inception fraud in the broker channel – brokers cannot afford to ignore the issue. Insurers will look to place business through the channels providing them with the best risk, and using a system like SSP Intelligent Quotes Hub enables the broker to eliminate fraud risk at application stage”.
The news comes as SSP continues the roll out of its Intelligent Quotes Hub, a market leading pricing and risk rating platform which enables insurers to identify fraudulent customer behaviour before a quote is even provided. Sitting within Intelligent Quotes Hub, SSP Verify is SSP’s counter-fraud solution which deals with complexities such as slight changes in names and addresses and different device usage in order to accurately link data to create a holistic ‘single customer view’. It enables users to monitor individual customer behaviour and identify in real-time if the same customer is providing different application data through different channels (e.g. via a broker or aggregator, online, over the phone or directly to the insurer). Users can also use it to prototype multiple anti-fraud strategies simultaneously.
1For details on how this figure was calculated, see: http://www.ssp-worldwide.com/1-42bn-ssp-uncovers-the-cost-of-lost-premium-fraud-to-the-uk-intermediary-motor-insurance-industry/
2ABI insurance facts 2014: https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2014/Key%20Facts/ABI%20Key%20Facts%202014.pdf
3Defined as those who have grown in the last 12 months
- Brokers are optimistic about GWP growth in the next 12 months.
- Commercial lines brokers are more likely to have grown GWP in the past year than personal lines brokers (63% vs. 37%).
- Improving customer service, operational efficiencies and skills are the biggest priorities for 2016 with digital capabilities seen as an important long-term investment.
- 81% of brokers want to reduce their time spent on compliance and admin.
According to new research from insurance technology provider SSP, the majority of British brokers (64%) expect to grow in the next 12 months, with over a quarter (28%) expecting to grow their gross written premium (GWP) by more than 10%. In contrast, only 3% of respondents claim that their GWP will decline, reflecting brokers’ optimism for the future.
SSP has surveyed over 300 brokers across the UK and found that commercial lines brokers are growing faster than their colleagues in personal lines. In the past 12 months, commercial lines brokers have grown faster than personal lines brokers, with 30% of commercial lines brokers expecting to see a double digit increase in the next year.
To ensure ongoing growth, it is fundamental that brokers understand the challenges they face and protect themselves against a new breed of emerging risks. Looking to the near future, the research shows that the biggest areas of focus for the coming year will be improving their customer service (85%), improving efficiency by reducing time spent on admin and compliance (81%), and improving skills of employees (78%).
|Top 5 growth drivers for UK brokers|
|1||Improving the quality of client service|
|2||Improving relationships with insurers|
|3||Increasing employee skills and training|
|4||Diminishing levels of competition|
|5||Entering a niche market|
A large proportion of brokers also admit that there is an increasing need to revamp their digital strategies. Over half of respondents (51%) are planning to invest long term in their digital technologies and more than 2 in 5 (45%) are looking to upgrade or integrate new IT software in the coming year. This ‘digitalisation’ process will help brokers deliver a faster, more personalised customer experience at a competitive rate, particularly important given today’s competitive market.
Steve Pearson, Managing Director, Broker Division at SSP said:
“Against the backdrop of financial markets instability and increasing risks, it is re-assuring to see that brokers are optimistic about their future performance, which is generating positive momentum for 2016.
SSP welcome the optimism expressed by the majority of respondents and are pleased to see that brokers are responding effectively to issues and challenges which may have an impact on their growth trajectory.
To stay ahead of market competition, we believe that a broker who is up to speed with technology capabilities and focused on delivering digital strategies is far more likely to succeed than one that chooses not to make that sort of investment in the future.”
Insurance technology specialist SSP today announces that motor insurer Hawkwell has become the fourth insurer to sign up to use the market-leading fraud-combatting capability SSP Verify.
By adopting this solution, Hawkwell will be able to create a holistic single customer view to identify in real-time fraudulent applications pre-inception. With this insight, Hawkwell can price premiums correctly and avoid fraudulent applications.
SSP Verify allows the behaviour of individual customers to be captured and monitored in real-time across all insurance channels, providing sophisticated insight into when application fraud is occurring. The rules within the solution differentiate between honest mistakes and deliberately fraudulent behaviour, and can be tailored to reflect each insurer's tolerance to application fraud.
The price of not implementing such a solution is immense. Last September, data from SSP revealed that the industry loses a potential £1.42bn in premiums as a result of motor insurance application fraud, in addition to potential exposure to claims costs in the region of £1.36bn.
Commenting on the deal, Adrian Coupland, Managing Director, Data and Distribution at SSP said:
"The level of insight provided by SSP Verify means that all insurers who sign up will improve their underwriting results by identifying problem customers before exposing themselves to the risk and then price or decline accordingly.
"As a result, these early adopters of our system are able to focus on building books of quality clients, with unwanted business passing back into the market to be written by insurers who remain unable to identify fraudulent applicants.
"Application fraud will rapidly become more acute for insurers who do not subscribe to such a service.
“Already the amount of attempted dishonest motor insurance applications uncovered by insurers rose by 18% year-on-year in 2014 to 212,0001. However, SSP has discovered that fraudsters are now targeting the details that are not so easy for insurers to verify, so these ABI figures are likely to be just the tip of the iceberg."
Tony Smith, Chief Executive at Hawkwell said:
"Application fraud is endemic in the industry and the SSP solution enables us to combat this. While other options just check limited criteria like addresses and NCD, SSP Verify actively tracks data manipulation in real-time for the more difficult to identify criteria.
"We can't afford to invest huge sums in buying information from all the available databases. With SSP Verify, we get a view across the whole insurance market in one place, providing essential protection that we can afford."