FACE-TO-FACE TRAINING
THE CHARTERED INSURANCE INSTITUTE
Introduction to Personal LinesClaims Procedure
Joining the CUE
the claims and Underwriting Exchange has now been up and running for some years. Martin Hoskins and Mark Allan of the ABI explain how it works and answer some of the questions it provokes.
According to the largest ever survey of fraudulent insurance claims in the UK, published by the ABI in December 1994, fraud is estimated to have cost the insurance industry £600m. in 1994. It is thought that fraud adds nearly 4 per cent, on average, to the cost of insurance.
While the insurance industry has always had to contend with fraudsters who often view insurers as fair game, it has only been with the introduction of the Claims and Underwriting Exchange (CUE), that insurers have been able to enforce a clampdown on bogus claims. CUE, the household phase of which became operational in November 1994, has been set up as a means of combating fraudulent and multiple claims and enabling risks to be underwritten more accurately.
The CUE database is a computer register of current insurance claims as well as claims for the past three years. When a new claim is made, it is loaded onto the register and the contents of the register are automatically searched. If details of the claim match details of any claims already recorded, a report will be sent within 24 hours to the current insurer and also to any other insurers that the claimant has made a claim against in the preceding 12 months. The insurer can then investigate the claim further to establish whether or not it is genuine. Similarly, when an insurer is considering writing a new policy or renewing an expiring one, it may request a search of the register to verify the proposer’s previous claims history. Information on the database will not be held indefinitely but will be deleted after five years.
Before an insurer can gain access to the CUE register, it has to become a member of Insurance Database Services Ltd (IDS). IDS was formed by the insurance industry to act as a legal and contractual channel on behalf of its members. Membership of IDS is open to insurance companies and Lloyd’s syndicates which are authorised to carry on general business in the UK.
At present, 31 insurers and their associated companies, representing over 70 per cent of the household market by premium income, are participating in the scheme and a further ten companies have confirmed their intention to join in due course. Virtually all insurers underwriting in the UK are expected to become members eventually as non-members will leave themselves vulnerable to fraud since lists of participants may be made available to policyholders. Plans are also currently in hand for claims made under household block policies administered by banks and building societies to be included in the register.
EXTENDED REGISTER
Work has begun on extending the register to cover private motor vehicles and the facility is expected to become available this summer. CUE has received widespread support from all sectors of the insurance industry. The introduction of this initiative means that premiums can now increasingly be based on genuine insurance claims and not inflated by the cost of fraud—a development which must be welcomed by honest policyholders who should not have to subsidise the fraudster.
Over the months that the scheme has been in operation a number of questions have frequently been asked by companies. We explain here some of the most common of these.
1.What offence is committed by fraudsters?
It is a criminal offence to obtain a pecuniary advantage by deception. Section 16(1) of the Theft Act 1968 provides that ‘A person who by any deception dishonestly obtains for himself or another, any pecuniary advantage shall, on conviction on indictment, be liable to imprisonment of a term not exceeding five years’.
Section 16(2) provides a list of the cases in which a pecuniary advantage within the meaning of this section is to be regarded as having been obtained. Section 16(2)(b) describes the case where a person is allowed to borrow by way of overdraft, or to take out any policy of insurance or annuity contract, or obtains an improvement of the terms on which he is allowed to do so’.
It is also a criminal offence to provide a false account. Section 17 of the Theft Act 1968 provides that
(1)where a person dishonestly, with a view to gain for himself or another or with intent to cause loss to another:
(a)destroys, defaces, conceals or falsifies any account or any record or document made or required for any accounting purpose, or
(b)in furnishing information for any purpose produces or makes use of any account, or any such record or document as aforesaid, which to his knowledge is, or may be misleading, false or deceptive in a material particular;
he shall, on conviction on indictment, be liable to imprisonment for a term not exceeding seven years.
(2)For the purposes of this section a person who makes or concurs in making in an account or other document an entry which is or may be misleading, false or deceptive in a material particular, or who omits or concurs in omitting a material particular from an account or other document, is to be treated as falsifying the account or document.’
2.What are the notification requirements of the Data Protection Act?
The Data Protection Act 1984 gave new rights to individuals, including policyholders, third party claimants and intermediaries, about whom information is automatically processed. These rights include an individual’s right to access the information about himself or herself held on computers (personal data), the right to compensation for inaccuracy or loss of data, or the right to correction or erasure of inaccurate data.
Participants in CUE will be giving maximum publicity to the existence of the database, as its deterrent effect is expected to play a sight role in reducing fraud.
The first data protection principle states that:
‘The information to be contained in personal data shall be obtained, and personal data shall be processed, fairly and lawfully.’
Information will be treated as having been obtained fairly if all the intended uses, holders and disclosures were obvious, or if the person providing it had been given sufficient information about all the intended uses, holders and disclosures to enable him to form a clear view about whether to enter a transaction either before or at the time that the information was given.
The Data Protection Act only requires data users to notify the person who provides the personal data. There is no need to notify other persons whose personal details may be disclosed.
3.Are there specific notification wordings for the CUE home database?
Following discussions with officials from the Data Protection Registrar’s Of fire, wordings have been agreed which will appear on proposal, claim and renewal forms. These will advise the policyholder of the nature and purpose of CUE and include a declaration of consent.
4.Can a search be made on open claims and new claims on existing policies notified policy renewal?
The database may be searched provided the claimant’s express consent is obtained on the basis of a data protection notice. Policyholders must also be advised that failure to give consent will not in itself prejudice their claim. Some of these forms may be sent back to insurers with neither consent’ nor ‘do not consent’ expressed specifically. In such cases insurers cannot assume that consent has been given.
5. How can suspected fraudulent claims be investigated ?
The ABI wholly supports the introduction of CUE (the Claims and Underwriting Exchange) that helps insurers clamp down on fraudulent claims.
The database can always be searched when a participant has independent evidence that a failure to search the database would be likely to prejudice the prevention or detection of fraud in a particular case (s.28, Data Protection Act 19X4). The claimant’s refusal to allow the participant to search the database is not sufficient evidence to produce initial grounds for the suspicion of fraud.
WRITTEN PRESENTATION
6.How can notices be supplied to policyholders who do not complete proposal forms?
Where a data subject is providing information orally, the participants are still required to provide their clients with a ‘presentation’ which gives an explanation of how the information is going to be used if that is not otherwise apparent.
If the insurer intends to search the database at the proposal form stage, a ‘presentation’ should be made giving the enquirer the same information as is contained in the notice to be printed on proposal forms.
If, on the other hand, the participant only intends to search the database at the claims stage, it might well be sufficient for a notice to appear on the printed proposal form which would be sent to the enquirer for signature before the policy was issued.
7.Can participants load historical claims on to tile database?
Legal advice has been received to the effect that there is no duty of confidence on participants which would prevent this. As a result, historical claims, ie, those claims which have already been made and where no data protection notice was provided, can be loaded on to the database and accessed by other participants.
In any event, even if there were an implied term as to confidentiality in the contract of insurance and it covered the information in question, the underlying reasons for the disclosure, both at the underwriting and at the claims stage, can be entirely justified by reference to the qualifications to that duty based on the public interest and on the interests of the insurer itself.
Following discussions with officials from the Data Protection Registrar’s Office, some restrictions on the use of this information have been agreed, which are reflected in the answer to question 4.
Martin Hoskins is manager, liability and specialist lines, and Mark Allen assistant manager, special projects, with the ABI.
The Chartered Insurance Institute/C06/12IPL/Mod 4/Hout 9/1