Are brokers Saints or Sinners when it comes to insurance fraud in Ireland?
Insurance fraud is often seen as being different from many other types of crime as it is viewed as a 'victimless' crime where no one is hurt.
However, the reality is very different. Insurance fraud costs insurance companies operating in Ireland an estimated EUR 100m annually which ends up being paid by honest policyholders.
News this week that five more people have been arrested as part of "Operation Nascar", which is examining fraudulent insurance claims in Ireland, brings to seventeen the number of people held so far under this welcomed initiative.
With the majority of motor and household insurance purchases still controlled by insurance brokers in Ireland should this fight against fraud not be lead by brokers or have they themselves unwittingly played a role in the current position? Surely, brokers are not so naive as to understand that when an insurer offers the lowest price, pays the highest commissions the only area of saving is in claims.
Faced with unprecedented levels of fraud, inflated or exaggerated claims, a huge growth in the compensation culture and continuing downward pressure on pricing, insurers must now take a tougher attitude on claims. Unfortunately, this change in attitude will impact the most on those insurers whose culture is to want to pay claims fairly and quickly as, in a market where the promotion of a good clams service is not treated seriously, such insurers will be unable to carry a premium price for their products or else run the risk of losing the business.
Brokers should be well aware of each insurers attitude to claims and the quality (or otherwise) of their claims service - either through their own experience or from the many industry studies. However, good claims services seldom result in extra business for either insurer or broker. The major drivers - especially in the personal lines insurance space (i.e. motor and household) - are still price and remuneration. Seldom do brokers stand by insurers who provide excellent service when faced with lower quotations. They may mention some of the pros and cons of changing insurers but for an insurer to be recommended by a broker, they still have to be the cheapest (or at least rank in the top three on the quote engines).
Without a premium price for special services - especially in the claims area - the industry will have a hard time tackling insurance fraud resulting in an inevitable downward spiral within the industry with more pressure (from insurers) to raise premiums matched only by further reductions in the level and quality of insurer services that serve to threaten the very industry upon which the broking community relies for its own survival.
In the end, brokers control the market. They can force change, drive standards and have some control over the future of the industry. Rather than ask for the lowest price and highest remuneration they, and their representative bodies, should be doing something constructive to change the market for the good of all.