Insurers need to share more data to fight against increase in fraud cases
Hong Kong’s Insurance Authority has only been in operation for a month, but a priority for the new regulator may be addressing the increasing number of fraud cases in the industry.
This is not just a Hong Kong problem – it is a worldwide trend.
Industry players estimate that about 10 per cent of global compensation claims on property damage or personal accidents are fraudulent, according to a blog entry posted by Secretary for Financial Services and the Treasury James Lau, citing statistics from the Hong Kong Federation of Insurers.
The federation said this type of fraud has become common in recent years, where an insurance claim for a damaged item would be made against seven or eight insurance companies at the same time.
Insurers, who don’t share information among themselves, are not aware of the multiple claims.
“We can imagine that these types of fraud cases would only result in insurance premiums going higher and honest policyholders will suffer as a result,” Lau wrote in his first blog after taking office earlier in July.
Lau said the Hong Kong Federation of Insurers is planning to address the issue by setting up a central database to track multiple claims to prevent this type of fraud.
While there is no timetable on when such data sharing will be available, the move is a positive one to prevent multiple claims from happening.
Besides property and personal accident insurance fraud, some insurers said they may be victims of fraud regarding hospital income protection policies where a person takes out several policies and seek claims from several insurers.
The new Insurance Authority should pay more attention to these types of fraud cases in the sector as such activities will hurt the reputation of Hong Kong’s insurance industry.
The use of technology and collection of big data can help prevent fraud while it can also contribute to lower premiums by enabling insurance companies collect more information about the behaviour and lifestyle of policyholders. For example, those with more healthy lifestyles should be entitled to enjoy lower premiums.
However, these developments may be easier said than done. Firstly, there are privacy issue as some policyholders may say no to sharing all their personal information with the insurer. Secondly, insurance companies may not like to share information with their rivals.
It is therefore not an easy task to develop such a comprehensive data centre. This project will be something for the city’s new insurance regulator to get busy with.