How will the introduction of a new online portal in England and Wales impact personal injury claims fraud? BAE Systems takes a look here;
For many years insurers across the globe have been struggling with a scourge of fictitious or exaggerated personal injury claims relating to road traffic accidents. In the UK the average claim of £1,850 is far lower than in other countries (In Ireland, for example the typical award is in the region of €10,000 to €20,000), but with 1,500 claims being made every day this still means that the cost of whiplash claims to policyholders amounts to an average of £90 per policy.
On 31 May, as a result of this unacceptable cost, England and Wales sees the introduction of a new self-service portal to make self-reporting by not-at-fault members of the public, free, easy and without any need for legal help. The new portal should be used for low-value personal injury claims up to £5,000 (to a maximum total of £10,000 for all losses). Claims will be paid according to a strict fixed tariff, depending on the duration of the injury and medical evidence must be provided.
Until now many claims of this type have been the favoured hunting ground of ‘no win, no fee’ representation, the disintermediation of which many will see as a positive example of cutting out the middleman and often disproportionate legal fees. Is there a chance that in a few months we rue their demise and their albeit unintentional role of providing an initial validation barrier to fraudulent claims? What other unintended consequences of this undoubtedly well-intentioned new portal could we possibly see?
In tackling fraudulent motor insurance claims, insurers have developed, over a number of years, well-established and sophisticated processes for rooting out fraud. The concern now is that the simultaneous introduction of a new portal, process and rules all at the same time will mean that some insurers without flexible fraud detection solutions in place will be faced with the unenviable choice of either being swamped with a massive influx of false fraud alerts or be forced to pay out on an increased number of suspicious claims.
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As claim applicants will not have their identities verified or IP addresses checked, there is the potential for fraud farming across a global network which circumvents simple safeguards against known suspicious activity, and potentially allows organised fraudsters to both duplicate and inflate claims. There may also be a surge in other types of claimant, such as pedestrians and cyclists, which cannot be simply accounted for by the onset of summer or the ending of lockdown.
If bombarding the portal directly does not have the desired result then fraudsters will also go hunting elsewhere. For example, insurers predict that there will be a sudden decline in whiplash-only injuries that are spontaneously replaced or supplemented by a corresponding increase in other forms of injury claim such as leg, wrist or neurological. Also that there will be an increase in attempted fraud across other lines of business such as personal liability. Perhaps even easier will be to contrive an increase in the claim amount to one above either of the maximum threshold limits so that the claim is processed in the same way as today.
Furthermore, fraud fever will also feed off other current innovations in the industry such as digitalisation and the drive towards frictionless claims. With high volumes of new claims submitted by uninitiated amateurs as opposed to experienced solicitors the increased volume of varied, poorer quality submissions is also likely to increase. These are less likely to fit to existing known fraud models and thereby require more manual intervention.
Being swamped with unmeritorious claims is a distinct possibility. Insurers do not have long to decide. The default position for no decision on a claim is to automatically assume that the claim has been accepted. Where a claim is challenged, the claim is no longer handled by the portal but falls under the existing Personal Injury Protocol wherein liability can be admitted for the accident but not necessarily for the personal injury.
The challenges could be exacerbated by the lack of an Alternative Dispute Resolution option where liability is denied. The Motor Accident Solicitors Society is concerned that, without a solicitor’ scrutiny, insurers will reject more claims5. Genuine claimants may simply withdraw, daunted by the complexities and cost of any further legal challenge. More determined ones may be forced into the small claims courts which are already seeing serious backlogs resulting from the Covid pandemic.
A final note of caution is that there is unlikely to be a sudden transition to the new portal and hence the implications for fraud may take a few months to become clear. The portal and its associated fixed tariffs only apply when injuries are fully recovered, so any accidents that occurred prior to 31st May will still fall under the existing small claims track. However, one thing is certain when it comes to fraud – always expect the unexpected.