How the new failure to prevent fraud offence could put insurers at risk.

The failure to prevent fraud corporate criminal offence holds particular pitfalls for unwary insurers.  In this month’s edition of Modern Insurance Magazine #68 Whitelk explores how the Economic Crime and Corporate Transparency Act poses a challenge to the insurance sector.

We consider how pressure to drive revenue from claims management, in particular through the uplift of claims costs in subrogation in models often known as ‘Coles’ or ‘retail uplift’ model can exposure insurers to profiting from claim supplier fraud.

We use the example of a fraudulently inflated supplier cost, with insurer margin applied can result in an insurer achieving a financial benefit from fraud.  On the face of it, a real risk for capture under the corporate criminal offence of failing to prevent fraud.

The guidance published in October for the ECCTA outlines pragmatic reasonable procedures to potentially protect against prosecution, including the need to complete effective risk assessment.  With types of fraud so specific to insurers seemingly being within scope, there’s never been a more pressing need for insurance organisations to maintain a fit for purpose fraud risk assessment.

To read the full article, visit:  https://moderninsurancemagazine.co.uk/the-magazine/