The industry’s ongoing battle with insurance fraudsters continues, with the Insurance Fraud Hotline saving the industry $700,000 in its first six months.

The hotline allows the public to ring and report a suspected fraud, and those who have done so have mostly discovered the service via the internet.

The Insurance Council of Australia (ICA), which operates the line through the Insurance Fraud Bureau, is now looking at how it can promote the service more.

ICA GM Risk and Disaster Planning Karl Sullivan told insuranceNEWS.com.au the service has collected information on crime such as organised car accidents, car theft and arson, and this year people deliberately leaving cars in flooded areas.

The hotline started in November last year and the savings to insurers have come through claims declined or where they have been able to recover costs.

Mr Sullivan says the Insurance Fraud Bureau is considering how to promote awareness of the hotline and of insurance fraud, “so people can understand insurance fraud is not a victimless crime; it costs everybody a considerable amount of money in their premiums”.

He says deterrence will also be a factor, so likely fraudsters understand their credit rating and ability to obtain insurance in future could be damaged.

The hotline enables callers to remain anonymous and they can telephone or send a message online.

There is an alternative hotline for law enforcement officers to provide details or seek information.

Since members of the public who become aware of fraud typically do not know the insurance company involved, the information is filtered and limited detail is provided to insurers likely to be carrying the policy.

If an insurer can show it holds the policy and has a reasonable belief that fraud may have occurred, then more information will be provided.

The Privacy Act comes into play and Mr Sullivan says the industry knew it had to tread carefully when establishing the hotline so consulted the Privacy Commissioner on how it should proceed.

On the commissioner’s suggestion, a privacy impact assessment was conducted to ensure the hotline operated within the law.

He says the industry is not intending to follow the UK example of establishing an Insurance Fraud Register – a central database of people who have committed insurance fraud.

The UK Insurance Fraud Bureau also operates a consumer hotline, Cheatline, and its Director Glen Marr says there is no shortage of reports from consumers.

He says initiatives such as the new register and establishment of a policing unit to combat insurance fraud [see “UK insurers to set up fraud register”, INTERNATIONAL] will ensure “fraudsters will increasingly find the insurance industry a hostile environment”.

Karl Sullivan says the Australian industry could compile a fraud register if it obtained a dispensation from the Privacy Act, by making an argument on the grounds of public interest. However, insurers have different thresholds for how they investigate and respond to suspected fraud, and the approach here is to leave insurers to make their own decisions and deal with matters rather than set up a central register of names.

Gary Gill, who leads KPMG’s forensic practice, says insurers are finding data analysis is becoming more sophisticated in detecting abnormal patterns in claims.

He says fraudsters tend to fall into three groups: the opportunistic offender who inflates a genuine claim; the criminal acting on their own; and organised criminals who commit fraud such as staged car accidents.

Mr Gill says it is important for insurers to be able to share information on organised crime, as the perpetrators will switch around insurers if they can get away with it.

“I have to believe there are ways you can do this within the bounds of the law respecting privacy, because there is a lot of money going missing and you and I and everybody is paying for it,” he said.