Health insurers are turning to data sharing systems used by police and security services to crack down on customers and private healthcare professionals suspected of lodging bogus claims.
Fraudulent claims made by individuals, employees with workplace cover, their healthcare providers – such as private sector doctors – and insurance brokers are estimated to account for about 5 per cent of claims paid by health insurers each year, costing the industry about £125m in 2007.
This cost is borne by honest policyholders through their premiums, say the insurers, although there is no official estimate of how much fraud inflates premiums.
Private health insurers currently share information about customers suspected of deceptive claims involving non-disclosure of pre-existing conditions or doctors billing for private treatments that did not take place.
But now 11 insurers, including Axa, PruHealth, Bupa and WPA, will begin using a formal web-based intelligence sharing system, where they can go online
and lodge their fraud concerns – a system used by the police.
“For too long, companies have worked in isolation and, when a fraud is discovered by one company, it simply shifts to another,” said Dr Simon Peck of the Health Insurance Counter Fraud Group. “The mission of our group is to pool our resources and knowledge to drive the fraudsters out of our industry.”
Insurers are able to step up counter-fraud efforts under Section 29 of the Data Protection Act which enables personal information about individuals, such as that held by an insurance company, to be exchanged if the use is for the prevention or detection of crime.
“Most of our customers and providers of healthcare services are honest but some are not,” said Peck.
“Using this system, you can log on and open a case on an individual suspected
of fraud. You can send an alert to all members that a case has been opened, or search for other files that may have been opened elsewhere as part of an investigation,” he said. But systems are also in place to protect individuals from misuse of their information or “fishing exercises” by insurers. If an allegation is later found to be incorrect it will be noted on the file.
“The system has a code of conduct, participating agreements and policies and procedures that users are required to sign up to prior to use,” said Ray Collins, fraud and anti-money laundering manager with PruProtection, adding that the company that stores the system server also stores data from both the UK and US army.
“The system is not targeting member claims; it is a way to manage fraud and prevent our members becoming victims of fraud themselves,” said Collins.
The benefits of greater fraud detection would be felt by policyholders, claimed the industry, with potentially cheaper premiums.
“Insurers’ premiums are based on a variety of factors and one of those is the costs of fraudulent claims,” said Jon French of the Association of British Insurers. “By reducing those costs, there may be a consequence for premiums.”
Any individual suspected of fraudulent activity would not be excluded immediately from cover, but insurers are likely to make a deeper check of any claims made.
Instances where the system might help insurers at an individual level could include the detection of a policyholder making multiple bogus claims with different providers.
Health insurers see potential for intelligence sharing to expand overseas and have forged partnerships with similar groups in Europe, Australia, the US, South Africa and Canada.
Closer to home, Peck says there may be advantages to extending the intelligence sharing system with the NHS’s counter-fraud team.
Of the £1.8m fraudulent monies recovered by Axa alone last year, £1.3m was recouped from private healthcare providers, including doctors, consultants and other professionals such as physiotherapists. “The lines between private and public sector are blurring,” said Peck.
The NHS said this week that information exchanged under its memorandum of understanding with health insurers was “governed by stringent data protection legislation and will be channelled only through designated points of contact”.
Get alerts on Personal Insurance when a new story is published