27 Oct Who Watches the Watchmen?
A look at crime and fraud statistics and the consequences for the Insurance Industry.
“There are lies, dammed lies and statistics” is a phrase often used to describe the pernicious use of figures to bolster a weak argument and nowhere is this description more applicable than in relation to the crime statistics published in recent years.
Policy makers such as Government and other authorities have long manipulated statistics for political gain or to help pursue a particular agenda and we have grown pretty much used to this, as concerning as it can sometimes be. However, the real danger arises when statistics are flawed.
At RGI we have for a long time felt that crime data has been misused, either inadvertently or deliberately, with the result that policy has been misguided. Lately, by following data sources and even popular media it seems clear to us that there is a crisis in establishing correct information about crime generally and fraud in particular.
For example the Office for National Statistics statistical bulletin released on 19/10/17 based on crime figures for the year to June 2017 suggested there was a 4% increase in the number of fraud offences recorded in England and Wales compared with the previous year. The figures they used came from 3 sources:
1. Action Fraud – which saw a rise of 21% in offences
2. Cifas – which saw a decrease of 4%
3. UK Finance – which saw a decrease of 8%
Now, to give you an idea of how unreliable these statistics might be, it was reported in July 2013 in the popular press that Action Fraud had lost nearly 2,500 crime reports. (You’ll be happy to learn that they apologised). This mistake occurred some time ago and we are not singling out Action Fraud as we are sure improvements have been made since.
So, surely this was a one off event that might affect the crime figures? Not so. There is emerging information from the police themselves suggesting that crimes have not been recorded properly or are now being recorded more efficiently; either way would skew the figures.
- One report published February 9th said “the force only recorded 82% of crime, leaving more than 17,400 crimes unrecorded”.
- “New policies emerge after Leicestershire Police ridiculed for not investigating burglaries at odd numbered houses”.
- “A million crimes reported by public left out of crime figures”.
- Bedfordshire Police Chief Constable, “We cannot keep people safe anymore….. the number of 999 calls had risen by 18% in two years and non-emergency calls by 15%”.
- Avon and Somerset Police Chief, “At breaking point …… for burglary and vehicle theft we will take a lighter approach”.
Is this surprising though as according to the Home Office’s statistical bulletin from July 2017 on the Police workforce, “There were 198,684 police workers employed by the 43 forces in England and Wales on March 2017, a decrease of 2,237 or 1% compared to the year earlier. This is the lowest number in the police workforce since March 2003”. It also advises that the current police officer numbers are the lowest since 1985. Therefore, our officers are extremely stretched and our emergency services have been tested significantly with the recent terror attacks.
We may also be seeing a reticence from the general public to report lower level crime and fraud to the police in the belief that the police are unlikely to investigate.
But now let’s just take fraud in isolation as that is a specific type of crime which directly impacts on our industry as investigators.
Certainly it is the case that under 1% of UK cyber-crime is being reported as published by the National Crime Agency (NCA) and the NCA have stated that the under reporting of cyber-crime is a true barrier to their understanding of its true scale and its cost.
If we concentrate on ‘crash for cash’, according to Aviva ‘crash for cash’ had hit an all-time high in November 2014 and the IFB confirmed that in 2015 1 in 10 personal injury claims were suspected to be as a result of a ‘crash for cash’ scam. Recently however there has been a shift in opinion in the insurance industry as evidenced by the ABI’s report on fraudulent insurance claims published 07/07/17.
Clearly fraud has been and always will be a real problem as the fraudsters evolve and target different areas. For example, the whiplash reform was introduced by the Government who say they are committed to tackling the continuing high number and cost of whiplash claims. Therefore, whiplash claims may not still be the country’s ‘claim of choice’ and the ‘claim of choice’ has potentially moved on, for example, the travel industry has seen a surge of sickness claims in this country reported to be as high as a 500% increase since 2013.
The insurance industry trade association itself has sent out mixed messages on the current trend as evidenced by the ABI’s report on fraudulent insurance claims published on 07/07/17.
ABI figures show that in 2016:
- Insurers detected 125,000 dishonest insurance claims valued at £1.3 billion. The number was down 5% on 2015, while their value fell 3%.
- The level of organised fraud fell by around 30% on 2015, with 15,000 frauds valued at £174 million detected. This fall reflects the work of the Insurance Fraud Bureau (IFB) and the Insurance Fraud Enforcement Department (IFED), the specialist police investigation unit, in exposing crash for cash staged motor accidents, and other organised frauds, such as criminals offering fake motor insurance. It is also believed that fraudsters are moving into new areas such as bogus liability claims. There has been an epidemic in false food poisoning claims made against some overseas hotels and tour operators, often encouraged by disreputable claims management firms.
- Both the number and value of detected motor frauds fell. The number, at 69,000, fell 4% on 2015; their value, at £780 million, was down 5%. The reduction in organised frauds, such as crash for cash scams, contributed to this reduction.
- However, there was a small rise in opportunistic motor insurance frauds. While the overall number of opportunistic frauds detected at 110m,000 remained unchanged on 2015, there was a rise in opportunistic motor insurance frauds uncovered – 57,000 compared to 54,000 in 2015. Opportunistic fraudsters will generally be otherwise law-abiding citizens. They are often encouraged by disreputable claims management companies, as seen by the resurgence in whiplash-style claims reported to the Government’s Compensation Recovery Unit.
- Property insurance frauds showed a slight fall. The number dropped 4% on 2015 to 26,000, while their value fell 2% to £106 million.
- Head of the City of London Police’s Insurance Fraud Enforcement Department, Detective Chief Inspector Oliver Little said:
“ The successful and strong relationship between the City of London Police’s Insurance Fraud Enforcement Department (IFED) and the ABI can be seen by these figures. This is a fantastic example of IFED working closely with the insurance industry to ensure that consumers are protected from such claims and perpetrators are brought to justice.”
The ABI figures do not seem to chime with the crime statistics available. Clearly, managing statistics in the fraud arena is fraught with difficulty as fraud can be a reported crime, an unreported crime, or a civil matter that leads to civil action such as when insurance companies decline a claim. This inevitably leads to a mis-match when anyone attempts to collate reliable fraud statistics from the crime and other data available.
Unfortunately, we have to conclude where we began. If available statistics are unreliable and thus open to misinterpretation, either purposely or by accident, how can policy makers and commercial enterprises make sound judgements in the present climate? Who watches those who watch these areas of concern on our behalf (and who, in doing so, have to use flawed statistics for their analysis) and how do we avoid the Donald Trump trap of assuming that if all statistics are unreliable then all news is fake news?
Who watches the watchmen? And how?
Author: Ray Glenn