car-insurance-fraudOn the Car insurance Blog we have warned about the dangers of car insurance fraud. We have also discussed the importance of blowing the whistle on car insurance fraudsters and alerted the online community to the work done by the South African Insurance Crime Bureau!

How can technology – and more specifically Hi-Tech solutions assist in combating and reducing car insurance fraud?

Hi-Tech Security Solutions spoke to the Chief Operating Officer of the South African Insurance Crime Bureau, Hugo van Zyl. This interview appeared in the February 2010 edition of Hi-Tech Security Solutions and we were given permission to share these insights with our readers on the car insurance blog.

In a bid to address the matter of short term insurance fraud in South Africa, the South African Insurance Crime Bureau (SAICB) came into being in July 2008.

In the short 18 months since its inception, the bureau can give testimony to the fact that organised crime and fraud are rife in the industry.

Hi-Tech Security Solutions: Can you expand on the challenges that you have had to face as well as the rewards?

Hugo van Zyl: The acquisition of data has been the biggest challenge. However, we have put in place measures to ensure that we will have the necessary data in our system by early 2010. The cooperation of the member companies and industry as well as the policing organisations has been phenomenal. We are seeing results with savings for the industry topping the R2 million mark already in preventive measures and cases to the approximate value of R60 million to date.

Hi-Tech SS: What is the role that the SAICB’s 11 member companies play and who else have you partnered with?

HvZ: The SAICB was formed to address the problem of syndicated and repeat offenders committing fraud in the insurance market, ie, organised crime. The need to adopt a unique approach was essential, because multiple companies are normally involved in this kind of fraudulent activity. The SAICB is a not-for-profit company so funding comes entirely from its member companies. Our data comes from the member companies who share their underwriting and claims information with us. In addition, we have other information part-ners like Tracker, South African Police Service (SAPS), Johannesburg Metropolitan Police Department (JMPD), National Prosecuting Authority (NPA), South African Fraud Prevention Society (SAFPS) plus others that work with us by sharing infor-mation to assist with investigations.

We also work closely with the South African Banking Risk Information Centre (SABRIC), the South African Insurance Asso-ciation (SAIA), the Financial Intermediaries Association of South Africa (FIA), who are important in ensuring that we can make a difference in the fight against crime and fraud.

Hi-Tech SS: How do the SAICB and its partners intend to change the dynamic of fraud in the sector?

HvZ: Through the sharing of information, we are able to identify and track fraudulent activities and syndicates over multiple companies. Through our investigative unit we can coordinate the resultant investigations incorporating all the relevant companies and policing authorities. The investigations are coordinated from investigation stage through the policing authorities and prosecution, with our investi-gators overseeing the whole process to ensure all the relevant information is submitted to facilitate successful prosecutions. We have very close ties with the relevant SAPS divisions and the NPA to help us achieve this. Our approach is aimed at discouraging fraud syndicates from operating in the insurance and financial space, by letting them know that we can and will identify their activities and that we will prosecute to the full extent of the law. The industry is very serious about zero tolerance when it comes to fraud, and even though the SAICB is focused on serial offenders and syndicates, we are also assisting the member companies in identifying opportunistic fraudsters.

Hi-Tech SS: How has the sharing of criminal intelligence with the central information management system worked out?

HvZ: We are using Memex, which is an intelligence data mining system that is able to take information in multiple formats, but allows you to search for very specific information. The SAICB has written about 50 business rules, which allows us to search the information for very specific trends that we know indicate syndicated behaviour. The resultant information is analysed by our analysts and verified by the member companies. Our investigators then take over the cases to coordinate the investigation and collection of the relevant information; they liaise with the relevant policing and prosecution organisations once the cases have reached the stage of prosecution.

Hi-Tech SS: Is the technology effective?

HvZ: The technology is effective because it is able to take in data in any format. Because of how it searches the information, it allows us to very effectively check our information and identify the patterns and trends that indicate fraudulent activity. It then allows us to map the links between the parties involved, to build the cases in Memex, so we can show how the case developed, plus its auditing process allows us to justify the processes. All in all, the whole process ensures that we can build the whole case in Memex, ready for hand over to the police and prosecutors for finalisation.

Hi-Tech SS: What is the technology revealing?

HvZ: This technology shows that the problem of insurance fraud is as far reaching and elaborate as we expected it to be, and that it needs to be addressed as a matter of urgency.

Hi-Tech Security Solutions: Are companies responding well to this?

HvZ: The cooperation received so far has been extraordinary.

Hi-Tech SS: What else has the SAICB initiated to curb fraud?

HvZ: We have begun to receive commercial information and will be receiving life information shortly. We are also developing a staff dishonesty database to identify staff members involved in assisting fraudsters with their activities.

Hi-Tech SS: What are insurance companies themselves doing to control the problem?

HvZ: Most insurance companies have their own internal investigative units that deal with opportunistic fraud. Syndicated and repeat offenders require a different approach because multiple companies are normally involved. This was why the SAICB was formed, to address this specific problem.

Hi-Tech SS: So often we talk of fraud committed by policyholders. But are brokers and insurance companies not sometimes also guilty of perpetuating fraud? Is the law doing what it should be doing with regards to irregular activities within institutions?

HvZ: We cannot answer this, but the involvement of brokers and staff are definitely investigated and to some extent form part of our investigations.

Hi-Tech SS: Does this crime run far deeper into the tentacles of organised crime and big business than meets the eye?

HvZ: We are currently busy with investigations into this issue and will only be able to answer this in the near future.

Hi-Tech SS: What impact is fraud having on the insurance industry in this current economic downturn?

HvZ: Fraud is having a very bad impact on the industry at present. Some member companies experienced a 27% to 36% in-crease in fraudulent burglary/robbery claims, an increase of up to 12% in fraudulent hijacking and vehicle theft claims and about a 10% to 15% increase in the so-called smaller claims (theft of cell phones, laptops, cameras, binoculars, jewellery, watches, etc).

This interview appeared in the February 2010 edition of Hi-Tech Security Solutions – Thank you to Leigh Yorke-Smith for permission to use this article. For further information please contact her on: yorkesmith@worldonline.co.za – website: http://www.securitysa.com

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