FRAUDULENT CLAIMS: DECEPTION & WHY PEOPLE LIE · •“He’s in a meeting” or “The cheque is...
Transcript of FRAUDULENT CLAIMS: DECEPTION & WHY PEOPLE LIE · •“He’s in a meeting” or “The cheque is...
FRAUDULENT CLAIMS:
DECEPTION & WHY PEOPLE LIE By
Tim Richardson ACII ACILA ACFS Head of Technical Claims
Direct Group Limited WHERE INSURANCE AND INNOVATION COMBINE
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Learning Objectives
1. Why People Lie
2. How Memory and Emotional Attachment helps identify truth tellers
3. The Investigative Interview Process
4. Fraud and the FOS
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D Is it a Victimless Crime? Why bother detecting it?
Annual fraud losses across the UK, through all the different
industries, now estimated to top £70 billion. Within this, insurance
fraud has risen by 23% in the last three years.
More than 2,500 fraudulent claims, worth over £18 million, detected
each week – around £1 Billion, detected & prevented annually
BUT - Insurance fraudsters are estimated to successfully obtain
over £2 billion a year, in bogus claims.
Insurance fraud is not victimless
-insurers pay out higher sums
-on average extra £50 added to every insurance premium
Why Bother?
FCA requires all financial institutions, including insurance companies to have effective counter fraud policy. Public need – reduce premiums, less stringent policy terms, deny criminals benefit & improve society
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D The Cause of Fraud?
Figures from a recent Gallup poll reveal:
49% believe the value of most claims is inflated by >1/3rd
76% agreed that fraud is “common” in insurance claims
69% said they would make a dishonest claim and think they will get away with it.
25% said insurance fraud is “understandable, acceptable, proper or praiseworthy”
These figures suggest that the main cause of insurance fraud is policyholder attitude & inclination.
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Why do People Lie?
People are not born liars. It is not normal behaviour.
So why do we lie?
• To avoid punishment
• To obtain advantage
• To make themselves look good
• To benefit another
• To be socially acceptable
Admitting to lying is often highly traumatic, as it can
destroy personal credibility and trustworthiness
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Why Do Lies Work?
We are lied to everyday!
- by our colleagues, staff, bosses, friends, our children and
by our spouses/partners....
So, why do lies work?
We prefer to believe what we are told
- in everyday life, people do not like asking awkward questions or
confronting potential issues
- we avoid seeking information which might turn vague concerns into
specifics that require action
As a result, most fail to ask the right questions at the right time!
LIES
Are Lies Always Bad?
•Altruistic
•“You look great” or “you haven’t changed a bit”
•Boasts
•“I’ve done that thousands of times”
•Jokes
•Pranks, wind-ups, etc.
•Deflecting
•“He’s in a meeting” or “The cheque is in the post”
•Embarrassment
•Lies about non-material issues to hide an embarrassing
reality
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Non-Verbals of the Legs & Feet
Honesty decreases as we move up the body.
Your feet are more honest than your Head!
• Bouncing feet – high confidence, happy, elated
• Toe point – happy, elated (gravity defying)
• Leg/foot splay – control, intimidation, threaten, territorial
• Leg crossing – leg direction dictates emotions
• Shoe dangle – comfort, courtship
• Foot lock with chair – freeze behaviour, nervous, threatened
Watch for the signals
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Non-Verbals of the Face
Raised eyebrows – surprise, disbelief
Biting lip – nervous, fearful, anxious
Direct eye contact – confident, positive
Avoiding direct eye contact – uncertain, wary
Head nod – positive messages (not always agreement)
Eye blink increase – troubled, nervousness, suspicious
Furrowed forehead (frown) – uncertainty, disagreement, resentful, angry
Lip licking – nervous, stressed, anxious
Face pale – fear, shock
Face blush – stress, got caught
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Generally Shifty
Deception and/or lying initiates a stress reaction in
most people. The stress is the fear of being detected
or caught.
Stress can be further induced by guilt.
• Nervous fingers
• Eye contact shifting
• Rigid/defensive posture
• Sweaty palms/face
• Variations in pitch, amplitude, and rate of speech
• Abnormal speech errors and hesitation (thinking)
• Increased embellishments of story or parts of the story
LIES &
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Y Understanding Memory
Truth tellers effectively replay mind recordings of past
events, because they can remember those events.
Easier to remember important /traumatic events than
routine, non-important ones.
Whereas
Liars have no mind record – only the vacuum of their own
imagination in which to create a picture.
A created, imaginary, memory is difficult to maintain and
to answer detailed questions about.
Questions are key
The more questions that are asked, the more difficult it is
for a liar to maintain the lie.
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Responses from the Brain
The Limbic System controls: • Emotions
• Emotional Responses
• Hormonal Secretions
• Mood
• Motivation
• Pain and Pleasure Sensations
• the ‘honest’ part of the brain, giving
off true responses
• reacts instantaneously in real time
and without thought.
• In the non-verbal world, it is where
the ‘action’ is.
• the other parts of the brain are the
thinking, creative parts - which can
deceive and often do
Gut Feeling – The ‘Hunch’
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The 3 ‘F’s
The 3 ‘F’s - Freeze, Flight and Fight.
1. Freeze - movement attracts attention.
2. Flight - when threat is too close, natural reaction is to run, get out of
harm’s way.
3. Fight – a last resort tactic. Survival through aggression.
The limbic brain has assured our survival as a species. It regulates our
natural behaviour during times of threat and danger with a view to self-
preservation.
But it has no concept of deceit .......
The 3 ‘F’s transferred into the world of deceit and fraud.
1. Difficult question silence, gathering thoughts
2. When fraudster believes investigation is getting close drop out!
3. If things become difficult complain.
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The TRUTH
Truth Tellers Usually:
Are consistent and can easily repeat story
Connect to story using first person pronouns
(I, Me, My, We, Our etc.)
Connect story to other events
Reveal lots of useful detail
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The LIE
Liars: Do not act normally – cognitive conflict
Struggle to build stories from their imagination
Struggle to commit to detail or to past event
Do not connect to incidents beyond the incident in
question
Move goalposts when they need to invent cover stories
for cover stories
Filter memory – pick out bits from real past
experiences
They:
Do not want to ‘own’ or ‘commit’ to their lies
Do display visual and verbal indicators of deception
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How to Spot Potential FRAUD
What to watch out for:
SCREEN
Story problems
- Gaps, missing steps
Credibility
- Improbable, Implausible, Impossible
Resistance
- Uncooperative, Angry, Threatening
Effort to give detail
- Struggles to develop, repeats minimal detail
Evasion
- Answers a question with a question, changes subject
Non Verbal issues (Vocals)
- Hesitation, Broken speech, pitch & tone
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Emotional Attachment
“People who have not actually experienced an event will lack the cognitive and emotional experiences associated with it.” Undeutsch 1982
What is Emotional Attachment? How does that translate to loss of an item? What are “YOU” emotionally attached to? How would you feel if you were without it?
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The Interview Process
Set the Scene – ‘meta-messages’
“Uberrima Fides”, the principle of Utmost Good Faith: Insurers are
entitled to accept that what they are told by the Customer is correct.
If you assume guilt, there is a danger you will not test for it.
THE INTERVIEW
• Making The Appointment
Key messages
• Create Escape Routes
Throughout process
• Management of the Conversation (PEACE) Prepare and Plan the Interview Introduction to build rapport Scene Setting/Obtain Account Question & Response/Clarification Pauses/Summarising Create Escape Routes Challenges?
EVIDENCE IS ESSENTIAL BEFORE ANY CLAIM CAN BE REFUSED
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The Financial Ombudsman Service
The Ombudsman examines all the facts and uses their
own guidelines to help reach an overall assessment • When considering Fraud, the FOS needs to: have evidence that an answer is a wrong answer (a misrepresentation) know why it is wrong understand what impact that wrong answer might have on the Underwriter or claims handler ....before they can accept an allegation of fraud and/or uphold a repudiation for fraud. FOS accept their decisions do not always agree with insurers. Opinions will differ, particularly when the decision is based on the balance of probabilities. Jury decisions rarely unanimous - even Court of Appeal judges often disagree, many decisions being made on 2 to 1 basis. EVIDENCE OF THE FRAUD IS ESSENTIAL BEFORE A REPUDIATION BASED ON FRAUD WILL BE ENDORSED
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TCF – The Right Balance
Prompt and
Efficient
Service, to
retain our
Client’s Honest
Customers
Proportionate
Counter Fraud
Measures to
Protect Honest
Policyholders and
Identify
Fraudsters
QU
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Techniques
I keep six honest serving men,
(They taught me all I knew).
Their names are what
and why and when and how
and where and who.
Rudyard Kipling 1865-1936
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Summary
Presentation on
Fraudulent Claims:
Deception & Why People Lie by
Tim Richardson ACII ACILA ACFS Head of Technical Claims
Direct Group Limited
10th December 2014
Email: [email protected]
Tel: 0844 8542043