The art of deception

Fraud is regarded as one of the biggest risks that the insurance industry faces. This is troubling for insurers and for brokers who do their level best to preserve the integrity and profitability of the industry.

As role players in the financial services industry, it would be foolish to believe that the systems and procedures we have in place make us immune to fraud as can be seen in the scenarios below:

Smash and grab

Mr Y reported a break-in to his vehicle in which his iPhone and iPad were stolen.
During the insurance claim investigation, Insurer A established that Insurer B had already settled a claim for the exact two items for theft out of a motor vehicle.
It was clear that Mr Y intended to defraud the insurer. Insurer A reported the matter to the South African Police Services (SAPS) for further investigation and prosecution under the Criminal Procedure Act.

In cahoots

Mrs Z submitted a motor vehicle theft claim to Insurer C. There were discrepancies regarding the claim, but the insurer was not able to prove that Mrs Z breached any policy conditions, and they paid the claim.

Months after the claim, an anonymous tip through their fraudline came in. It suggested that Mrs Z would give the claims handler X amount if he ensured that Assessor A was appointed and that certain documents disappeared.

It was found that the three parties above operated a syndicate, and the matter was reported to the SAPS for investigation and prosecution.

Detecting anomalies

Linguistic text analysis, where one studies the language, grammar and syntax a person uses to describe an event, highlights predictable differences between truthful and deceptive statements. Seeing that the insurance industry deals with written or verbal statements every day, I share a few of Dr Paul M Clikeman’s findings as discussed in his article The 10 Tell-Tale Signs of Deception.

Indicators of deception

Deceptive people often:

• Avoid referring to themselves by describing events in the passive voice. E.g. “You know how it goes: The one moment you see your car in the parking area; the next minute it’s gone.”
• Talk about past events as if it is occurring in the present.
• Answer questions with questions.
• Make vague statements that lack detail to avoid contradicting themselves at a later stage.
• Provide as little useful information as possible whilst trying to convince others of their innocence by swearing on their lives for example.
• Use euphemisms to put their actions in a more favourable light.
• Avoid explaining that they have indeed performed certain actions. E.g. “Did you lock your car before you went into the store?” “I lock my car every night.” But did they lock their car the day of the theft?

The narrative balance

One should also take note of the narrative balance of a statement. It sounds technical, but is an easy concept to grasp. A narrative consists of three parts: prologue, critical event and aftermath. Dr Clikeman explains that a prologue contains 20 to 25 % background information and describes events that took place before the event. The critical event is the most important occurrence in the narrative and usually contains 40 to 60 % detail of the event. The aftermath describes what happened after the event and typically receives 25 to 35 % attention. If one part of the narrative is significantly shorter or longer than expected, information may have been omitted or added.

Most people also tend to speak in sentences of between 10 and 15 words. When people feel anxious, they tend to speak in sentences that are either significantly longer or shorter than the norm.

Whilst it is sad that the industry should take note of findings such as the above, the truth of the matter is that we will fall prey to fraud if we are not aware of the tell-tale signs.