Is there strength in numbers?
ITIJ spoke to several travel insurers in the UK to assess the ongoing development of the travel claims sharing database, asking whether or not there really is an appetite among the industry to work cohesively to fight fraud
First published in ITIJ 119, December 2010
ITIJ spoke to several travel insurers in the UK to assess the ongoing development of the travel claims sharing database, asking whether or not there really is an appetite among the industry to work cohesively to fight fraud
Last Friday, 19th November, Julie Remmington (pictured below) began assessing a series of tenders for a project aimed at reducing travel insurance fraud in the UK. For Remmington, chairman of The Travel Insurance Claims Committee (TICC), the process marked the beginning of the end of a personal and an industry-wide 15-year long journey. The project – developing a database along the lines of the household and motor Claims Underwriting Exchange or CUE for the travel insurance sector – would allow insurers to track peoples claims histories with those of the rest of the sector and hopefully catch multiple claimants. It’s an idea that has garnered precious little industry support over the years, but Remmington is hopeful of getting the new system up and running in time for next summer’s peak-holiday season.
An ongoing battle
“We tried to get a CUE database going in 1995 but the industry wasn’t as developed then as it is now,” says Remmington. “It was dismissed because travel insurers thought it would be too complicated and too expensive because the margins in the sector are very low. There was also debate about whether that cost should be borne by the insurer or the claims handler.”
For the next ten years, the TICC ran its own system, using faxes to inform insurers of ‘dodgy’ claims and claimants before it ended over data protection concerns. Then, four years ago CRIS, which runs part of the home and motor database, came to the TICC eager to get an equivalent travel CUE started. “It wanted travel on board and they were keen to talk with our members, but we just couldn’t get the bigger insurers to support it,” states Remmington. “We sent emails to the decision makers but we didn’t get a reply.”
The TICC did have enough backers – four insurers – to supply three years of data to CRIS for it to run through a trial database and come up with successful matches.
“Travel insurers collect data in a different way. Because some refer to baggage claims as personal possessions and others as belongings, the matches we found weren’t strong.”
However, Remmington says, it took ‘a long time’ for the insurers to provide the data as contracts had to be signed protecting confidentiality. Also, one of the insurers then pulled out at the last minute because they were unhappy over how the data would be held.
“The trial wasn’t as successful as we hoped,” explains Remmington. “Travel insurers collect data in a different way. Because some refer to baggage claims as personal possessions and others as belongings, the matches we found weren’t strong.”
A new hope
However, last year a project team consisting of representatives from AXA, Chartis, Groupama, Cunningham Lindsey, Insure & Go and the TICC, with the backing of the Insurance Fraud Bureau, restoked the CUE dream.
“The tenders are now out to find a database host,” explains Remmington. “They will tell us what they can provide and how much it will cost.”
Remmington says a ballpark figure would be a 40p fee paid by an insurer to check a claim against the database, down from the £1.50 a claim mooted 15 years ago.
“Hopefully all the underwriters of travel insurance will subscribe and the claims teams in all companies will have an additional resource to combat fraud,” she states. “There are still a few companies who are very protective and want to do their own thing and not share information. But we are a lot more open as an industry now.” While she would like the system in place before next summer, Remmington is not setting a strict deadline. “I’ve been doing this for so long, I just want it to happen,” she states.
When ITIJ talked to insurers about the prospect of a CUE database arriving soon, it was hard to detect the reasons behind Remmington’s nervousness or why it has taken the industry so long to come together on this issue. The feedback seemed overwhelmingly positive.
Stuart Bensusan, head of sales at Essential Travel, suggests that one in 10 travel insurance claims have a ‘fraudulent element’ and that the only way the industry is going to combat the problem is to work together. “If one insurer goes out with a hard line on fraud and doesn’t get the support of the industry, that company will run the risk of losing customers to the competition. I believe that a CUE database, which every travel insurer commits to signing up to, is the best way to unite the industry against fraud,” he states. “I wouldn’t say that there is a lot of resistance in the industry to the idea of a CUE system. Some insurers are concerned about exposing sensitive data and overcoming the issue of different companies using different systems, but as long as it’s done properly, I think it’s a very good idea.”
Paul Everett, director of sales and marketing at Europ Assistance agrees: “The desire for the database has always existed but previous initiatives have foundered due to data protection act concerns or set up and access costs. There is now a clear understanding that such a database would contravene no regulations and is an essential investment in a time of ever-increasing fraud.”
One more from Chartis: “We have long advocated a similar industry-wide approach to travel insurance. It’s early days and a lot of work still has to be done before an efficient mechanism is in place,” says David Miller, head of UK claims. “However, I’m pleased that we are moving forward as an industry as ultimately it is only through joint and concerted effort that we will tackle the problem. Let’s not forget that the cost of insurance for all is increased by the actions of a minority, so our focus is on making it as difficult as possible for fraudsters whilst delivering valued benefits to the vast majority of our customers who have genuine claims.”
Perhaps Remmington is right. Perhaps the industry is ready to come together and secure the positive benefits of a CUE database from collective action.
“I believe that a CUE database, which every travel insurer commits to signing up to, is the best way to unite the industry against fraud,”
But perhaps not yet. Some significant caution about the industry being able to come together over this issue and make it work still lingers.
A note of concern
AXA Insurance’s group fraud risk manager Richard Davies is supportive of the database and believes it will be very effective in identifying serial claimants. “As an industry we need some visibility as to the very small number of people potentially claiming regularly on a non-genuine basis,” he says. “They need to be screened in the right way to protect the product and the genuine customer.”
He is confident that the industry can be collaborative over this issue and that competitive concerns over sharing data will not be a factor. However, he expresses concerns over both cost and whether the industry can effectively manage and use the data in the correct way. “Can it be a cost-effective system? You have relatively thin margins in the travel business so you have got to be comfortable with paying extra money for data feed and employing more people to respond to what the data is telling you,” Davies says. “Those insurers who don’t operate the data in the way it is intended will increase the cost of the product for the honest customer. We need to deliver a system that works the way it was intended to work and not just deliver a system quickly because it looks like an easy thing to do.”
What does he mean by that?
“We all hear urban myths about serial claimants and it will be great to turn those myths into fact by analysing the data. But the biggest question the insurance industry has got is how to respond to that risk identification process,” he says. “I want to be comfortable that we have the right governance of control over how individual insurers react to that information so that the interests of honest customers are visibly protected. My perception is that the travel industry has some way to go before it gets to the point of fraud control maturity that we see in other product lines, in particular home and motor.”
“the travel industry has some way to go before it gets to the point of fraud control maturity that we see in other product lines, in particular home and motor.”
Davies stresses that a match on a database is just that, a match, and not evidence of fraud. It is therefore vital to follow the information through and be investigated in a professional manner.
“If that doesn’t happen. If firms haven’t got the correct levels of skill, then there is an inevitable risk that the interests of an honest customer are going to be compromised in some shape or form,” he adds. “That is the worst possible outcome and if that is a risk then I would rather not see a CUE database being set up.”
There is also the hint of a potential split in the industry over the running of a database.
It seems they are like London buses. You wait years for one and then suddenly two appear. Mike Webb, chief executive officer of Mondial Assistance in the UK, has been working with four other insurers, Axa, AIG, GTI and Travel Claims Services to create a shared database for claims independent of that being proposed by the Insurance Fraud Bureau and the TICC. These insurers equate to roughly between 25 and 30 per cent of the market. Its system creates a risk score and has helped the insurers improve their fraud detection rates and prevent multiple fictitious claims.
Webb says it was created because the development of CUE was simply taking too long. “We are desperate for it to happen. As long as it is cost effective it is the ideal solution,” he states. “But at Mondial we are conscious that this has been talked about it for some time and sometimes the industry is better talking about something than actually doing it.”
Webb would like more insurers involved in the database, but stresses that it is not there to replace CUE. “Ours is an interim solution. If CUE becomes a reality we would definitely want to be involved with it but we can’t keep waiting,” he states.
This will please Remmington.
“For CUE to work we need Mondial to work with us,” she says. “Their system will not work. No disrespect to them but it only works if you use their computer system. The claims they are sourcing from are very small and the matches are very small. What they are doing is better than nothing but they would be better off joining us.”
Webb stresses again that Mondial would join CUE but says its system would be “retained for a while to make sure we get the benefits that we want to get. It needs to be very low cost.”
Former Insure & Go chief Perry Wilson is ruling out the industry ever getting together on this issue. “The biggest problem is that everyone in the travel industry is so scared about giving their data to someone else,” he says. “This has been rumbling on now for 15 years. I’d be amazed if it actually goes ahead. People in the travel industry are stupid, they don’t want to listen to new ideas.”
Wilson also fears CUE will fail to tackle the ‘real cancer’ of fraud, which stems from overseas medical clinics. “When you get a €27,000 bill from a healthcare clinic in Turkey that doesn’t actually exist, then that is the biggest problem,” he says. “CUE is good for catching the odd fraudulent person but not that. We should be spending our money where the big fraud is happening. But we’ve tried to get the industry behind us on this but again nothing has happened.”
Despite this, Remmington is hopeful of soon ‘celebrating’ the introduction of CUE. On previous concerns she says: “Confidentiality is no longer a problem as all the systems are compliant these days. The synergies of terminology are more difficult but we have agreed them in principle, but until we choose a supplier for the database it will not be finalised.”
Wilson also fears CUE will fail to tackle the ‘real cancer’ of fraud, which stems from overseas medical clinics
She is sure CUE is the answer for the industry and that it is ready to work together to reduce the cost of fighting fraud. “The motor industry has highlighted serial claimants and seen costs come down through its CUE system,” she says. “We can do it as well. We can work pretty well together.”