The UK Financial Services Authority has set up a new reporting system designed to reduce the level of financial crime in the insurance industry. The watchdog is calling on insurance firms and intermediaries to inform it when they suspect criminal behavior, so that the body can decide whether to investigate further.
The Financial Services Authority (FSA) commented that this could arise when an insurer terminates an agency agreement with an intermediary where they see doubtful practice or suspect misconduct. The watchdog added that it could also arise when an insurance intermediary has concerns about another intermediary it does business with.
The FSA listed possible financial crime involving insurance fraud as including misdemeanors such as the misappropriation of client money or money held under risk transfer agreements; failure to pass on premiums, refunds or claims; and falsifying customer details to obtain insurance business that would otherwise be turned down or be more expensive.
Stephen Bland, the FSA’s director of small firms, commented: We are looking to all insurance firms to participate in this scheme and help us beat criminal financial activity in their industry. We want to know when a firm has suspicion or evidence of malpractice so that we can act on it where appropriate. We hope that by sharing intelligence in this way, we can work together to reduce financial crime.
Both the Association of British Insurers and the British Insurance Brokers’ Association have voiced support for the new system. Eric Galbraith, BIBA’s chief executive, said: Financial crime is detrimental to the entire industry and it is the responsibility of all of us to work together to eradicate the problem and to ensure that consumers are protected against its consequences.
The FSA commented that, like the mortgage fraud reporting system set up in April 2006, the insurance reporting system will enable it to target its investigations more efficiently and, where appropriate, take action more quickly against firms that conduct their business in a criminal way.