Why data is critical to countering insurance fraud in Ireland

November 6, 2019 / 2 min read

With disproportionately high awards being paid out for injury cases in Ireland and the near-zero risk in attempting to fabricate or exaggerate a claim, insurers need to make sure they’re doing all they can to counter suspected fraud.

According to representative body Insurance Ireland, insurance fraud is estimated to cost the Irish insurance industry more than €200 million each year and adds €50 annually to each insurance policy.

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Insurance fraud is defined as a deliberate deception perpetrated against or by an insurance company or agent for the purposes of financial gain. Fraud can occur at any stage in the insurance life cycle, from the initial quotation through to the final settlement of a claim.

At the insurance application stage, fraud happens when facts are deliberately misrepresented to gain cheaper insurance. An example of this is ‘fronting’, where an individual claims that he or she is the named driver on a parent’s motor policy, when in reality that person is the main driver of the car.

Other examples used to obtain cheaper insurance include nondisclosure, where people will not fully reveal their claims history, and gaming, where they’ll provide incorrect information to try to get cheaper insurance (for example, change their occupation in the application).

During the claims stage, common examples of fraud include claim exaggeration, misrepresenting the facts, or completely fabricating a claim. Deliberately exaggerating an injury to submit a claim can result in much higher payouts in court, with the insurer taking the hit.

Whiplash-related injuries make up the majority of personal injury compensation claims, and statistics from the Government Personal Injuries Commission show the average award in Ireland is just shy of €20,000—4.4 times higher than in the UK.

Injuries like these are often difficult to verify, making it easier for some claimants to greatly exaggerate the extent of their injuries for financial gain. The insurer has to rely on the claimant providing accurate details on the incident and the level of injury sustained—with this imbalance in knowledge abused by unscrupulous claimants.

To address this imbalance, insurers can use data from a wide variety of sources to level the playing field. By sourcing data from independent third parties, insurers can significantly reduce the risk of relying on a claimant to provide all details when applying for insurance or making a claim.

At Verisk Ireland, we offer a data enrichment service to assess the key indicators of risk at both the insurance application stage and the claims stage. Insurers can benefit from our predictive framework to look at the past claims activity and behaviour of an individual and generate a relative risk score to help make an assessment at point of quote or when settling a claim.