Steps insurance firms need to take to reduce internal fraud

It is estimated that 71% of fraud is perpetrated by (or in collusion with) staff. Recent high-profile cases across the insurance sector clearly demonstrate that this is now a risk that the sector cannot afford to ignore.

Last week, Moore Stephens held a seminar focused on the internal fraud risks permeating the insurance market. Two clear themes emerged: the importance identifying your specific business’ fraud risk profile, and the need to constantly review anti-fraud controls in order to keep up with legal, regulatory and technological changes. However, in a recent Moore Stephens poll of insurance businesses, it was found that over 40% of respondents did not have a fraud risk register in place. It must be stressed that it is not enough to simply list fraud at a high level within the corporate risk register; to be effective it is vital to capture the detail in a fraud risk register.

A central tenet of establishing a working anti-fraud risk framework is embedding a robust whistleblowing culture with proportionate policies and effective reporting systems. However, a third of our survey respondents suggested that their business’ whistle blowing procedures ‘could be better’ or were ‘poor’. Whistleblowing plays such a key role in identifying possible fraud that it is vital to ensure it becomes a part of an organisation culture. Furthermore, it is a requirement under SYSC 18.4 of the FCA guidelines for firms to have a whistleblowers’ champion (which is expected to be a NED).

Steps to consider
The old adage ‘prevention is better than cure’ very much applies here, with studies proving a 7:1 return spend per pound on prevention. If you have not already done so, it is now more imperative than ever to put measures in place to better protect your organisation from attacks. The steps you needs to consider are set out below.
 
1. Acknowledging the risks:
  a.    consider what are your businesses specific risks are;
b.    ensure you have the right number of staff and skills to tackle the risks;
c.    get top-level support.
2. Preventing and deterring:
  a.    improve your culture and awareness;
b.    utilise IT;
c.    review policies and controls;
d.    gather intelligence
3. Pursuing offenders and assets:
  a.    undertake professional investigations and consider a combination of sanctions to get the money back including criminal, civil, disciplinary and regulatory.
How we can help
Moore Stephens offers a range of services designed to help you create and embed a strong anti-fraud culture and build prevention and detection strategies through awareness, training, policies and controls.

Unfortunately, there will always be a need for investigations – these should be conducted professionally and cost-effectively. We are able to conduct such investigations, gathering evidence to a standard that can be used in criminal, civil, disciplinary and regulatory proceedings.

For more information on how we can identify and mitigate insider fraud within your organisation, please get in touch.
 

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