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9/22 W01/March 2017 Award in General Insurance

9.5 An insurer can prevent policyholder fraud and claims fraud by the following ways:
• Be aware of risk enhancing factors when designing a new insurance products, e.g. policyholders in
financial difficulties may be encouraged to stage the theft of a car or to commit arson to their property if the
terms of the insurance contract provide for compensation on the basis of replacement value instead of
current value or ‘new for old’. Insurers may also consider offering policies with claims replacement
services, where the loss is compensated by a replacement in kind instead of compensation in cash.
• Assess the inherent fraud risk of its existing insurance products. In making their assessment, insurers
should involve those with relevant expertise, e.g. fraud experts or claim settlers.
• Establish an adequate client acceptance policy, e.g. implementing the following elements:
– Part of the client acceptance policy should include the categorisation of expected product-client
combinations.
– For each combination, it should be clear whether and under which conditions a client can be accepted
and which measures insurers should take to prevent or detect fraud.
– The categorisation should be evaluated periodically. Part of this evaluation should include a comparison
of detected fraud rates with expected fraud rates.
• Establish adequate client acceptance procedures. Consider implementing the following elements:
– Unexpected product-client combinations should receive special attention.
– Client should be identified and the identity verified.
– Approaches used for client acceptance include using professional judgment based on experience,
checking red flag lists, conducting peer reviews and checking internal and/or external databases. Reference copy for CII Face to Face Training

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