00:00:06
Vanessa Baffoe: Hello and welcome back to another episode of Insurance Tomorrow, brought to you by Allianz Insurance. I'm Vanessa Baffoe. Now, today we're tackling a topic that continues to evolve and challenge our industry. What am I talking about? Fraud. With International Fraud Awareness Week upon us, it's time to take a look at how these sophisticated schemes are impacting businesses, consumers, and the insurance sector as a whole. We'll also explore emerging fraud trends, effective prevention strategies, and the evolving role that brokers actually play in identifying and mitigating these risks.
But I'm delighted to be joined by Matt Crabtree, who's head of Financial Crime Intelligence and Investigations at Allianz UK, and also Craig Kennedy who's partner and head of Cyber Consulting at national law firm, HF. they'll be sharing their expertise on the most prevalent types of fraud affecting businesses and consumers, the unique vulnerabilities that they might face, and how collaboration between organizations is crucial when it comes to combating these threats. It's great to have both of you here with us on Insurance Tomorrow. Welcome.
00:01:12
Matt Crabtree: Thank you.
00:01:13
Craig Kennedy: Thank you.
00:01:13
Matt Crabtree: Good to be here.
00:01:14
Vanessa Baffoe: Matt, I'm going to start with you. International Fraud Awareness Week is such an important time for the sector. I'm just keen to get an overview from you about fraud in the UK insurance sector, but also, what are the most prevalent types of frauds that brokers are having to deal with today?
00:01:32
Matt Crabtree: So it is such an important week for us, which is why we're here to talk about the broad landscape. Fraud continues to evolve. One of the biggest risks that we continue to see affecting the industry, in particular brokers, is ghost brokers, false or fake intermediaries placing fraudulent business with insurers which is affecting customers and brokers in particular. We also see and continue to see a rise in cash- for- crash, often driven by some of the sort of economic challenges that we're seeing in the country at the moment, so people are turning to organize crash- for- cash, inducing accidents to deliberately crash into one of our genuine customers, or indeed paper- based incidents where two parties will come together and agree to have a crash that pursues compensation claims against insurers.
One of the biggest things that we've been doing this year is working really closely with our information security team because we're seeing an increase in cyber risks, which is why I've got Craig joining us today to talk again around some of the increases that we see on cyber fraud and cyber crimes that is affecting us.
00:02:25
Vanessa Baffoe: Matt, as you were speaking, I was raising my eyebrow there because I cannot believe some of the extent that people will go to. That's really shocking. Craig, I could see you nodding as well.
00:02:34
Craig Kennedy: There's always been a lot of fraud in the market and I think the issue with cyber and the digital capability now is that that amplifies all of the frauds that are already well known in the market. So things like artificial intelligence platforms are often increasingly used for cyber security platforms but they're also now used by threat actors, and it really amplifies a lot of the conventional attacks like payment diversions or the artificial inflation of insurance claims. It's much easier for these things to take place now assisted by artificial intelligence.
00:03:06
Vanessa Baffoe: So with all of that being said then, Craig, how does fraud affect businesses and consumers too?
00:03:11
Craig Kennedy: You sometimes hear the saying that fraud's a victimless crime, and of course we know that it's not a victimless crime. There's very obviously a financial impact associated with it for the businesses that are impacted by it and the knock- on impact for customers in terms of price rises to account for sums that are lost to fraud. One of the challenges with the cyber aspects of fraud is the complexity it brings with it. So in circumstances where in the olden days, it was a payment diversion, that someone had either redone an invoice or persuaded someone to make a payment by phone, that was relatively easy to unwind. At the point that systems are now being compromised and we need digital forensics teams to come along to examine what's going on, examine the extent of compromise, it complicates the recovery effort but also increases the cost associated with recovery.
00:04:00
Vanessa Baffoe: And Matt, are there specific vulnerabilities that brokers need to be aware of when it comes to advising their clients?
00:04:06
Matt Crabtree: Yeah, I think the difficulty we've got is no two frauds are the same. We just heard from Craig there around some of the artificial intelligence, and we're seeing that in our claims fraud as well with voice impersonations taking place, with digital images coming into us of invoices fraudulently produced. The wider impacts on consumers, I talked earlier regarding inducing accidents, so that's where people are slamming on, so we're seeing genuine customers being caught up and on some occasions injured in these accidents that have been deliberately caused.
We have also seen ghost broking, the fake insurance policies. Fundamentally, these are high risk drivers and high risk cars getting put on the road by illegal intermediaries and going undetected by AMPR cameras. We've unfortunately seen a few occasions where these vehicles are causing very serious accidents to genuine members of the public, so just encourage our brokers to really work at understanding who the client is, validating who the client is, validating the payment sources so we can be comfortable that that is a genuine customer putting on a genuine policy with us.
00:05:00
Vanessa Baffoe: On the back of what you just said there about encouraging your brokers to do those, what about the role that they play when it comes to identifying but also mitigating some of the fraud risks when it comes to those risks for their clients?
00:05:13
Matt Crabtree: Absolutely. Our brokers are our first line of defense in fraud. They're a point of engagement with the customer so they are such an important part of our fraud defenses. We've got a number of systems that we will operate when the policies come through to us and we blend that with machine learning techniques, with intelligence, with fraud technologies to detect the fraud. But fundamentally, our brokers are our front line defense, so anything we can do to encourage and support them in that defense is vastly important.
00:05:37
Vanessa Baffoe: Craig, let me come to you on this. Are there any things, any strategies that you can advise brokers when it comes to how they can advise their clients in terms of when it comes to mitigating any risks at all for their clients?
00:05:50
Craig Kennedy: Yeah, so I completely agree, brokers are the first line of defense, and of necessity, they are a receptacle of a amount of information. They understand what keeps their clients up at night, they understand the sorts of controls that are put in place to try to guard against the threats that keep the people up at night, and that information can be passed on to help businesses fight against fraud or cyber threats. There's a lot that they can do to try to share knowledge round about what the threats are in the market, what other clients are seeing, because very often with fraud or cyber, it's very much a private incident. You might be able to read about things in the papers, but you don't actually get the specific granular detail of what's gone on behind the scenes, and that can make it quite difficult to make improvements to guard against things.
In terms of what brokers can do to improve the security of their clients, I would always say that security starts at home. So at the point that you are being entrusted with someone's data, it's imperative that you have the appropriate technical and operational controls to keep that data safe so that you're not the party that introduces risk into your supply chain and wider ecosystem.
00:06:53
Vanessa Baffoe: Just looking at the overview that you've painted, we can really see that the issue is prevalent, and then you are looking at the increase in artificial intelligence as well and the role that they're playing, my goodness. So how then do companies like Allianz and HF come together to collaborate to combat fraud?
00:07:10
Craig Kennedy: So I think intelligence is key. HF has its own proprietary AI platform called ELI, and that's used to weed out fraudulent claims, ingest a huge amount of data and it makes it much easier to spot fraudulent claims that are submitted, so that brings lots of efficiencies to that process. We also have a data analytics platform, and one of the challenges with cyber risk in the insurance industry is there isn't the same depth of data that exists for some more traditional risks that are insured. And that platform allows us to aggregate data and start to make predictions and calculate and assess various different events and the impact of those, and that too brings efficiencies to something that can otherwise be quite difficult to challenge.
We also have a capability to be able to give organizations a hacker's view of their business. So sometimes businesses really worry about how to keep hackers out. We can show them how they get in, we can show them what information is in the dark web, and we can also carry that function out for businesses within their supply chain so they can make sure that they have that information available for them, but also businesses that they do business with as part of their wider supply chain.
00:08:14
Vanessa Baffoe: Okay. Matt, I'm going to come to you here because I really want to know, looking ahead, what are some of the new trends or types of frauds that are actually emerging that brokers need to be aware of so that they can then advise their clients?
00:08:28
Matt Crabtree: Fraud is constantly evolving. I think it's difficult for we as an insurer or our brokers to keep up with some of the technologies that the pros can deploy a lot quicker than we can. The voice and the deepfake images and things like that are a real threat for us. We're seeing a number of ghost brokers moving into the short- term policies that we and some of our brokers offer and that ability to take out short- term policies, so ghost brokers are absolutely moving into that space, which is continued threats.
We're doing quite a lot to combat that, so we're bringing our business together. Our fraud and financial crime teams are coming together across the personal, commercial and specialty businesses, a strong single point of contact for all these fraud threats. We've just increased our capabilities around and our people around our organized fraud teams, so we've got dedicated handling and indeed dedicated controllers working for me to help coordinate this response, and that's worked really well. So in the last two years, we've doubled year- on- year and we're on track to do that again this year for the amount of ghost brokers that we've identified and referred through to IFED at the City of London Police for disruption.
I've also just been over at Belfast speaking to PSNI, the police force in Northern Ireland about how we can disrupt some of that professional enabler fraud taking place, and again, bring people to justice. This is not necessarily just about logging savings and moving on. It's disrupting at the core, which is a real focus for us here at Allianz.
00:09:40
Vanessa Baffoe: As you were saying there, Craig, this is not a victimless crime. There is an impact and it does have a knock on impact, and from your point of view too, I also want to get from you, what are the new emerging trends? What are some of the new types of frauds that insurance brokers need to be aware of so that they can then alert their clients to these new threats?
00:09:59
Craig Kennedy: I think lots of people focus on the actual scams themselves and concentrate less on perhaps the motives for the scams, particularly from a cyber perspective. When you think about what's going on in the world right now, we've got active war zones in the Ukraine and the Middle East, we've got geopolitical tension elsewhere in the world. We've got nation states that try to circumvent financial sanctions by pushing out aggressive, financially motivated cyber attacks or cryptocurrency thefts, and there's a lot of cyber weapons being used at a nation state to nation state level. I'm hoping you know about those as they're very sophisticated, they're very dangerous, and quite often, they leak out beyond their intended target. So if a country launches one of these attacks at country B, it's very possible that the attack will leak out in the public and the private sectors, so even if a business wasn't the intended target, there's every chance that they could be disrupted by wider cyber disruption that exists globally.
And I think one of the most interesting examples, not of a state sponsored attack, but the scattered spider attacks obviously made headlines recently, they had a devastating impact on the retail sector before hitting insurance and then moving to aviation. And they were unique or certainly novel in that they had a very strong social engineering element, and I would be interested to know how many businesses actually put specific training out post those attacks for the people that are answering the phones either at reception or help desks requesting passwords. And my fear is that not many businesses would've done that, and if that's correct, how can businesses be said to be responding to threats in the market and taking the appropriate steps to forewarn staff so that they're prepared not to introduce a threat into their organizations?
00:11:40
Vanessa Baffoe: So taking the appropriate step there, isn't it? How's Allianz then, Matt, just preventing and disrupting the fraud market? What lessons can we learn?
00:11:48
Matt Crabtree: Yeah, absolutely key. That's some of the work that we've been doing internally as well, and then I think the other crossover into more of our fraud space that Craig's referring to there is we often see in some of our ghost- broking activity where stolen identities are used by ghost brokers to set up policies with us. They often come from the dark web, which can be as a result of some of the cyber attacks that we're seeing, so the crossover from one world into the other is absolutely taking place.
I think for the wider work that we're doing, half one this year, we've just detected in excess of 90 million pounds worth of fraud, so that's savings that we made as a business of attempts that would've come into us across our UK business. That's continuing and set to probably increase as we move forward with the threat that we're facing, but I come back to the point that we look to disrupt it at source. It's around understanding the motive and disrupting it, which is why we're really keen to work with and we continue to work with regulators, law enforcement agencies, to get to the bottom of who's behind the fraud and bring those people to justice.
00:12:39
Vanessa Baffoe: That is a staggering amount there that you just mentioned, Matt, and I'm thinking, my goodness. And so Craig, I'll come to you on that, with that figure and the impact that it's having and potentially could have on many businesses if they fall victim, right? Let's just look ahead then and see how fraud is evolving over the next few years. How do you see it's evolving?
00:12:58
Craig Kennedy: I think it will continue to evolve at pace, both with an amplification of the existing frauds that are already out there, but also new cyber attacks, new things will continue to evolve. We see these new things emerge every single day, and that presents a big challenge for businesses to try to keep on top of it, and I think that's why if businesses can reflect on why they might be targeted by a threat actor, it makes it slightly easier for them to understand the sorts of things that they need to do to predict where the attacks might come from. The legal and regulatory landscape is changing, so with things like the Digital and Operational Resilience Act, for example, now makes appropriate levels of resilience mandatory, and in circumstances where there's not now enough to have a policy, you have to have a policy that works, you can prove works, and is going to be effective at the point then businesses encounter disruption.
So I think threats will continue to amplify, and I think the real work that we'll see in the market is businesses trying to really do a lot of work to get themselves up to where they need to be, and from a resilience perspective, to make sure that they're as secure as they can be.
00:13:59
Vanessa Baffoe: Matt, what are some of the challenges that brokers face, and how can they address these challenges proactively?
00:14:06
Matt Crabtree: When I speak to brokers, often the challenges around data and understanding the data that insurers have around policies that are being canceled, the frauds that are being committed, and it's that front line defense. So I think anything that brokers can do to identify the client, to make sure that the client hears who they say they are, and ideally, payment validation is really key. It's not impossible for fraudsters to get around. We hear all the time around the sophisticated levels of data and technology that they're using to defraud us, but any ability the brokers can have to validate that payment process and a customer is paying for a policy with them, checking that their card's registered to their address that's been provided and things like that, it's really key just to help give them some comfort that that person is who they say they are and it's a genuine reason for incepting the policy.
00:14:46
Vanessa Baffoe: I hadn't even thought about somebody actually trying to impersonate somebody in that area like a broker or something. You'd normally think about consumers, don't you, from that angle? But I hadn't thought about that angle.
00:14:56
Craig Kennedy: And at fraud level, you used to be able to trust what you could see, but increasingly now with the use of deepfakes, there are reported examples of senior individuals within a business having a deepfake of them out there, and then that's used to facilitate a payment diversion and that has resulted in tens of millions of pounds being re- diverted. So if there was once upon a time, it would be a case of in the event you receive the change of bank details, manually verifying that that was correct or not, it's now harder because you're actually looking at who you think you're looking at and you've got to take steps to make sure that it's actually them.
00:15:28
Matt Crabtree: And I think that's a very key point actually around businesses and brokers being aware that if someone tries to divert an employee's salary into a different account or for a supplier into a different bank account, just validate that because there is a good chance that that might be a deepfake, whether that's a voice or a written letter coming in purporting to be that employee or that supplier and just looking to divert it. We have had experience of people attempting to divert employee salary payments into other accounts and things like that, so there is literally no holds barred when it comes to fraudsters trying to make some money out of us.
00:15:58
Vanessa Baffoe: And just listening to everything you're saying, I'll be honest with you, I find it absolutely fascinating, and the lengths and extents that people will go to commit fraud. Craig, let me just ask you about adding value basically in the context of fraud prevention. What unique value then can brokers offer to their clients, which basically just goes beyond that traditional insurance advisory?
00:16:20
Craig Kennedy: I think cybercrime has done a lot to change the face of insurance, particularly cyber insurance, and it's now not uncommon for insurance policies to have technical solutions built into them. So that could include things like dark web monitoring or cyber risk assessments or perhaps supply chain monitoring, so that over time and in the coming weeks, months and years, brokers will need to start to get a handle on what these technical solutions are and how they dovetail with solutions that are already being used by their customers. And whilst I can't ever see a situation where brokers will ultimately be playing a significant part in the security posture of their clients, I do think they'll need to understand, A, what levels of resilience exist within the business, and B, how the technical solutions that are embedded within insurance policies fit in or complement what's already there within the business.
00:17:08
Vanessa Baffoe: Matt, let's look at the long- term strategies and let's just throw ahead and let's look at some of the strategies that brokers should be adopting to ensure that they remain effective when it comes to combating fraud, but also supporting their clients.
00:17:23
Matt Crabtree: Yeah, and I think that's the thing, is the brokers are there because their clients trust them. That's their first entry, so I think having brokers there to communicate with their clients and build this trust, whether that's a personal lines broker that's got a customer coming to them and speaking to them, educating them on some of these scams and frauds, and likewise larger businesses, commercial businesses, transport managers, et cetera, making sure that they're aware of how to capture evidence from the scene is going to be key, and that moves on into the long term as well around risk assessments, looking ahead as to what could be coming. We talked about some of the conflict taking place in the world at the moment, some of the challenges that we've got in the UK in relation to the economy. That's going to mature as we get into '26 and '27, so being aware of some of those and how they could impact their clients and them as brokers is going to be key.
00:18:05
Vanessa Baffoe: And Craig, what's your take?
00:18:06
Craig Kennedy: I think there's a real dynamic threat landscape out there, of course there is, but I also think there's a real opportunity within the insurance sector to try to marshal the fightback, and I think that starts with the policies that are available of course, but also just the industry and its strategic partners working to drag the levels of resilience up. Now, we're fortunate that the law dictates that currently, and I think the point we have this opportunity, we've got this changed landscape where we no longer have tick box compliance. You have to prove that your levels of resilience are appropriate. It gives us all an opportunity to really embed relationships with our clients and be the trusted advisor to make sure that we get them to the place they need to be from a resilience perspective so that they are as secure as they can be.
00:18:50
Matt Crabtree: Yeah, I think the only thing I'd add onto it, I don't think it's necessarily always about worrying too much about what might come because the basic frauds still exist. Even this year, we've had some of the most basic frauds coming through because people will try anything. So long- term planning and evolving is key and making sure you stay ahead of the game, but likewise, don't forget the basic stuff. And people, phantom passengers as we refer to it, where just putting people in cars that weren't there at the time of accidents, low speed impacts. I think the economy then drives that sort of element, and making sure brokers are educating their customers to be taking pictures at the scene of an accident, looking at damage and capturing it, because a long- term plan is important, but the basics are absolutely still a risk.
00:19:26
Vanessa Baffoe: Well, with that in mind, we'll bring this episode of Insurance Tomorrow to a close. I want to say a massive thank you to Matt Crabtree, who's head of Financial Crime Intelligence and Investigations at Allianz UK, and also to Craig Kennedy, who's partner and head of Cyber Consulting at national law firm, HF, for your valuable insights on navigating this rather complex landscape. And a huge thank you also to you for joining us, and don't forget, you can subscribe through your normal podcast app so you never have to miss an episode. And while you are there, why not leave us a review? We'd love to hear from you. Until next time, see you soon.
Vanessa Baffoe: Hello and welcome back to another episode of Insurance Tomorrow, brought to you by Allianz Insurance. I'm Vanessa Baffoe. Now, today we're tackling a topic that continues to evolve and challenge our industry. What am I talking about? Fraud. With International Fraud Awareness Week upon us, it's time to take a look at how these sophisticated schemes are impacting businesses, consumers, and the insurance sector as a whole. We'll also explore emerging fraud trends, effective prevention strategies, and the evolving role that brokers actually play in identifying and mitigating these risks.
But I'm delighted to be joined by Matt Crabtree, who's head of Financial Crime Intelligence and Investigations at Allianz UK, and also Craig Kennedy who's partner and head of Cyber Consulting at national law firm, HF. they'll be sharing their expertise on the most prevalent types of fraud affecting businesses and consumers, the unique vulnerabilities that they might face, and how collaboration between organizations is crucial when it comes to combating these threats. It's great to have both of you here with us on Insurance Tomorrow. Welcome.
00:01:12
Matt Crabtree: Thank you.
00:01:13
Craig Kennedy: Thank you.
00:01:13
Matt Crabtree: Good to be here.
00:01:14
Vanessa Baffoe: Matt, I'm going to start with you. International Fraud Awareness Week is such an important time for the sector. I'm just keen to get an overview from you about fraud in the UK insurance sector, but also, what are the most prevalent types of frauds that brokers are having to deal with today?
00:01:32
Matt Crabtree: So it is such an important week for us, which is why we're here to talk about the broad landscape. Fraud continues to evolve. One of the biggest risks that we continue to see affecting the industry, in particular brokers, is ghost brokers, false or fake intermediaries placing fraudulent business with insurers which is affecting customers and brokers in particular. We also see and continue to see a rise in cash- for- crash, often driven by some of the sort of economic challenges that we're seeing in the country at the moment, so people are turning to organize crash- for- cash, inducing accidents to deliberately crash into one of our genuine customers, or indeed paper- based incidents where two parties will come together and agree to have a crash that pursues compensation claims against insurers.
One of the biggest things that we've been doing this year is working really closely with our information security team because we're seeing an increase in cyber risks, which is why I've got Craig joining us today to talk again around some of the increases that we see on cyber fraud and cyber crimes that is affecting us.
00:02:25
Vanessa Baffoe: Matt, as you were speaking, I was raising my eyebrow there because I cannot believe some of the extent that people will go to. That's really shocking. Craig, I could see you nodding as well.
00:02:34
Craig Kennedy: There's always been a lot of fraud in the market and I think the issue with cyber and the digital capability now is that that amplifies all of the frauds that are already well known in the market. So things like artificial intelligence platforms are often increasingly used for cyber security platforms but they're also now used by threat actors, and it really amplifies a lot of the conventional attacks like payment diversions or the artificial inflation of insurance claims. It's much easier for these things to take place now assisted by artificial intelligence.
00:03:06
Vanessa Baffoe: So with all of that being said then, Craig, how does fraud affect businesses and consumers too?
00:03:11
Craig Kennedy: You sometimes hear the saying that fraud's a victimless crime, and of course we know that it's not a victimless crime. There's very obviously a financial impact associated with it for the businesses that are impacted by it and the knock- on impact for customers in terms of price rises to account for sums that are lost to fraud. One of the challenges with the cyber aspects of fraud is the complexity it brings with it. So in circumstances where in the olden days, it was a payment diversion, that someone had either redone an invoice or persuaded someone to make a payment by phone, that was relatively easy to unwind. At the point that systems are now being compromised and we need digital forensics teams to come along to examine what's going on, examine the extent of compromise, it complicates the recovery effort but also increases the cost associated with recovery.
00:04:00
Vanessa Baffoe: And Matt, are there specific vulnerabilities that brokers need to be aware of when it comes to advising their clients?
00:04:06
Matt Crabtree: Yeah, I think the difficulty we've got is no two frauds are the same. We just heard from Craig there around some of the artificial intelligence, and we're seeing that in our claims fraud as well with voice impersonations taking place, with digital images coming into us of invoices fraudulently produced. The wider impacts on consumers, I talked earlier regarding inducing accidents, so that's where people are slamming on, so we're seeing genuine customers being caught up and on some occasions injured in these accidents that have been deliberately caused.
We have also seen ghost broking, the fake insurance policies. Fundamentally, these are high risk drivers and high risk cars getting put on the road by illegal intermediaries and going undetected by AMPR cameras. We've unfortunately seen a few occasions where these vehicles are causing very serious accidents to genuine members of the public, so just encourage our brokers to really work at understanding who the client is, validating who the client is, validating the payment sources so we can be comfortable that that is a genuine customer putting on a genuine policy with us.
00:05:00
Vanessa Baffoe: On the back of what you just said there about encouraging your brokers to do those, what about the role that they play when it comes to identifying but also mitigating some of the fraud risks when it comes to those risks for their clients?
00:05:13
Matt Crabtree: Absolutely. Our brokers are our first line of defense in fraud. They're a point of engagement with the customer so they are such an important part of our fraud defenses. We've got a number of systems that we will operate when the policies come through to us and we blend that with machine learning techniques, with intelligence, with fraud technologies to detect the fraud. But fundamentally, our brokers are our front line defense, so anything we can do to encourage and support them in that defense is vastly important.
00:05:37
Vanessa Baffoe: Craig, let me come to you on this. Are there any things, any strategies that you can advise brokers when it comes to how they can advise their clients in terms of when it comes to mitigating any risks at all for their clients?
00:05:50
Craig Kennedy: Yeah, so I completely agree, brokers are the first line of defense, and of necessity, they are a receptacle of a amount of information. They understand what keeps their clients up at night, they understand the sorts of controls that are put in place to try to guard against the threats that keep the people up at night, and that information can be passed on to help businesses fight against fraud or cyber threats. There's a lot that they can do to try to share knowledge round about what the threats are in the market, what other clients are seeing, because very often with fraud or cyber, it's very much a private incident. You might be able to read about things in the papers, but you don't actually get the specific granular detail of what's gone on behind the scenes, and that can make it quite difficult to make improvements to guard against things.
In terms of what brokers can do to improve the security of their clients, I would always say that security starts at home. So at the point that you are being entrusted with someone's data, it's imperative that you have the appropriate technical and operational controls to keep that data safe so that you're not the party that introduces risk into your supply chain and wider ecosystem.
00:06:53
Vanessa Baffoe: Just looking at the overview that you've painted, we can really see that the issue is prevalent, and then you are looking at the increase in artificial intelligence as well and the role that they're playing, my goodness. So how then do companies like Allianz and HF come together to collaborate to combat fraud?
00:07:10
Craig Kennedy: So I think intelligence is key. HF has its own proprietary AI platform called ELI, and that's used to weed out fraudulent claims, ingest a huge amount of data and it makes it much easier to spot fraudulent claims that are submitted, so that brings lots of efficiencies to that process. We also have a data analytics platform, and one of the challenges with cyber risk in the insurance industry is there isn't the same depth of data that exists for some more traditional risks that are insured. And that platform allows us to aggregate data and start to make predictions and calculate and assess various different events and the impact of those, and that too brings efficiencies to something that can otherwise be quite difficult to challenge.
We also have a capability to be able to give organizations a hacker's view of their business. So sometimes businesses really worry about how to keep hackers out. We can show them how they get in, we can show them what information is in the dark web, and we can also carry that function out for businesses within their supply chain so they can make sure that they have that information available for them, but also businesses that they do business with as part of their wider supply chain.
00:08:14
Vanessa Baffoe: Okay. Matt, I'm going to come to you here because I really want to know, looking ahead, what are some of the new trends or types of frauds that are actually emerging that brokers need to be aware of so that they can then advise their clients?
00:08:28
Matt Crabtree: Fraud is constantly evolving. I think it's difficult for we as an insurer or our brokers to keep up with some of the technologies that the pros can deploy a lot quicker than we can. The voice and the deepfake images and things like that are a real threat for us. We're seeing a number of ghost brokers moving into the short- term policies that we and some of our brokers offer and that ability to take out short- term policies, so ghost brokers are absolutely moving into that space, which is continued threats.
We're doing quite a lot to combat that, so we're bringing our business together. Our fraud and financial crime teams are coming together across the personal, commercial and specialty businesses, a strong single point of contact for all these fraud threats. We've just increased our capabilities around and our people around our organized fraud teams, so we've got dedicated handling and indeed dedicated controllers working for me to help coordinate this response, and that's worked really well. So in the last two years, we've doubled year- on- year and we're on track to do that again this year for the amount of ghost brokers that we've identified and referred through to IFED at the City of London Police for disruption.
I've also just been over at Belfast speaking to PSNI, the police force in Northern Ireland about how we can disrupt some of that professional enabler fraud taking place, and again, bring people to justice. This is not necessarily just about logging savings and moving on. It's disrupting at the core, which is a real focus for us here at Allianz.
00:09:40
Vanessa Baffoe: As you were saying there, Craig, this is not a victimless crime. There is an impact and it does have a knock on impact, and from your point of view too, I also want to get from you, what are the new emerging trends? What are some of the new types of frauds that insurance brokers need to be aware of so that they can then alert their clients to these new threats?
00:09:59
Craig Kennedy: I think lots of people focus on the actual scams themselves and concentrate less on perhaps the motives for the scams, particularly from a cyber perspective. When you think about what's going on in the world right now, we've got active war zones in the Ukraine and the Middle East, we've got geopolitical tension elsewhere in the world. We've got nation states that try to circumvent financial sanctions by pushing out aggressive, financially motivated cyber attacks or cryptocurrency thefts, and there's a lot of cyber weapons being used at a nation state to nation state level. I'm hoping you know about those as they're very sophisticated, they're very dangerous, and quite often, they leak out beyond their intended target. So if a country launches one of these attacks at country B, it's very possible that the attack will leak out in the public and the private sectors, so even if a business wasn't the intended target, there's every chance that they could be disrupted by wider cyber disruption that exists globally.
And I think one of the most interesting examples, not of a state sponsored attack, but the scattered spider attacks obviously made headlines recently, they had a devastating impact on the retail sector before hitting insurance and then moving to aviation. And they were unique or certainly novel in that they had a very strong social engineering element, and I would be interested to know how many businesses actually put specific training out post those attacks for the people that are answering the phones either at reception or help desks requesting passwords. And my fear is that not many businesses would've done that, and if that's correct, how can businesses be said to be responding to threats in the market and taking the appropriate steps to forewarn staff so that they're prepared not to introduce a threat into their organizations?
00:11:40
Vanessa Baffoe: So taking the appropriate step there, isn't it? How's Allianz then, Matt, just preventing and disrupting the fraud market? What lessons can we learn?
00:11:48
Matt Crabtree: Yeah, absolutely key. That's some of the work that we've been doing internally as well, and then I think the other crossover into more of our fraud space that Craig's referring to there is we often see in some of our ghost- broking activity where stolen identities are used by ghost brokers to set up policies with us. They often come from the dark web, which can be as a result of some of the cyber attacks that we're seeing, so the crossover from one world into the other is absolutely taking place.
I think for the wider work that we're doing, half one this year, we've just detected in excess of 90 million pounds worth of fraud, so that's savings that we made as a business of attempts that would've come into us across our UK business. That's continuing and set to probably increase as we move forward with the threat that we're facing, but I come back to the point that we look to disrupt it at source. It's around understanding the motive and disrupting it, which is why we're really keen to work with and we continue to work with regulators, law enforcement agencies, to get to the bottom of who's behind the fraud and bring those people to justice.
00:12:39
Vanessa Baffoe: That is a staggering amount there that you just mentioned, Matt, and I'm thinking, my goodness. And so Craig, I'll come to you on that, with that figure and the impact that it's having and potentially could have on many businesses if they fall victim, right? Let's just look ahead then and see how fraud is evolving over the next few years. How do you see it's evolving?
00:12:58
Craig Kennedy: I think it will continue to evolve at pace, both with an amplification of the existing frauds that are already out there, but also new cyber attacks, new things will continue to evolve. We see these new things emerge every single day, and that presents a big challenge for businesses to try to keep on top of it, and I think that's why if businesses can reflect on why they might be targeted by a threat actor, it makes it slightly easier for them to understand the sorts of things that they need to do to predict where the attacks might come from. The legal and regulatory landscape is changing, so with things like the Digital and Operational Resilience Act, for example, now makes appropriate levels of resilience mandatory, and in circumstances where there's not now enough to have a policy, you have to have a policy that works, you can prove works, and is going to be effective at the point then businesses encounter disruption.
So I think threats will continue to amplify, and I think the real work that we'll see in the market is businesses trying to really do a lot of work to get themselves up to where they need to be, and from a resilience perspective, to make sure that they're as secure as they can be.
00:13:59
Vanessa Baffoe: Matt, what are some of the challenges that brokers face, and how can they address these challenges proactively?
00:14:06
Matt Crabtree: When I speak to brokers, often the challenges around data and understanding the data that insurers have around policies that are being canceled, the frauds that are being committed, and it's that front line defense. So I think anything that brokers can do to identify the client, to make sure that the client hears who they say they are, and ideally, payment validation is really key. It's not impossible for fraudsters to get around. We hear all the time around the sophisticated levels of data and technology that they're using to defraud us, but any ability the brokers can have to validate that payment process and a customer is paying for a policy with them, checking that their card's registered to their address that's been provided and things like that, it's really key just to help give them some comfort that that person is who they say they are and it's a genuine reason for incepting the policy.
00:14:46
Vanessa Baffoe: I hadn't even thought about somebody actually trying to impersonate somebody in that area like a broker or something. You'd normally think about consumers, don't you, from that angle? But I hadn't thought about that angle.
00:14:56
Craig Kennedy: And at fraud level, you used to be able to trust what you could see, but increasingly now with the use of deepfakes, there are reported examples of senior individuals within a business having a deepfake of them out there, and then that's used to facilitate a payment diversion and that has resulted in tens of millions of pounds being re- diverted. So if there was once upon a time, it would be a case of in the event you receive the change of bank details, manually verifying that that was correct or not, it's now harder because you're actually looking at who you think you're looking at and you've got to take steps to make sure that it's actually them.
00:15:28
Matt Crabtree: And I think that's a very key point actually around businesses and brokers being aware that if someone tries to divert an employee's salary into a different account or for a supplier into a different bank account, just validate that because there is a good chance that that might be a deepfake, whether that's a voice or a written letter coming in purporting to be that employee or that supplier and just looking to divert it. We have had experience of people attempting to divert employee salary payments into other accounts and things like that, so there is literally no holds barred when it comes to fraudsters trying to make some money out of us.
00:15:58
Vanessa Baffoe: And just listening to everything you're saying, I'll be honest with you, I find it absolutely fascinating, and the lengths and extents that people will go to commit fraud. Craig, let me just ask you about adding value basically in the context of fraud prevention. What unique value then can brokers offer to their clients, which basically just goes beyond that traditional insurance advisory?
00:16:20
Craig Kennedy: I think cybercrime has done a lot to change the face of insurance, particularly cyber insurance, and it's now not uncommon for insurance policies to have technical solutions built into them. So that could include things like dark web monitoring or cyber risk assessments or perhaps supply chain monitoring, so that over time and in the coming weeks, months and years, brokers will need to start to get a handle on what these technical solutions are and how they dovetail with solutions that are already being used by their customers. And whilst I can't ever see a situation where brokers will ultimately be playing a significant part in the security posture of their clients, I do think they'll need to understand, A, what levels of resilience exist within the business, and B, how the technical solutions that are embedded within insurance policies fit in or complement what's already there within the business.
00:17:08
Vanessa Baffoe: Matt, let's look at the long- term strategies and let's just throw ahead and let's look at some of the strategies that brokers should be adopting to ensure that they remain effective when it comes to combating fraud, but also supporting their clients.
00:17:23
Matt Crabtree: Yeah, and I think that's the thing, is the brokers are there because their clients trust them. That's their first entry, so I think having brokers there to communicate with their clients and build this trust, whether that's a personal lines broker that's got a customer coming to them and speaking to them, educating them on some of these scams and frauds, and likewise larger businesses, commercial businesses, transport managers, et cetera, making sure that they're aware of how to capture evidence from the scene is going to be key, and that moves on into the long term as well around risk assessments, looking ahead as to what could be coming. We talked about some of the conflict taking place in the world at the moment, some of the challenges that we've got in the UK in relation to the economy. That's going to mature as we get into '26 and '27, so being aware of some of those and how they could impact their clients and them as brokers is going to be key.
00:18:05
Vanessa Baffoe: And Craig, what's your take?
00:18:06
Craig Kennedy: I think there's a real dynamic threat landscape out there, of course there is, but I also think there's a real opportunity within the insurance sector to try to marshal the fightback, and I think that starts with the policies that are available of course, but also just the industry and its strategic partners working to drag the levels of resilience up. Now, we're fortunate that the law dictates that currently, and I think the point we have this opportunity, we've got this changed landscape where we no longer have tick box compliance. You have to prove that your levels of resilience are appropriate. It gives us all an opportunity to really embed relationships with our clients and be the trusted advisor to make sure that we get them to the place they need to be from a resilience perspective so that they are as secure as they can be.
00:18:50
Matt Crabtree: Yeah, I think the only thing I'd add onto it, I don't think it's necessarily always about worrying too much about what might come because the basic frauds still exist. Even this year, we've had some of the most basic frauds coming through because people will try anything. So long- term planning and evolving is key and making sure you stay ahead of the game, but likewise, don't forget the basic stuff. And people, phantom passengers as we refer to it, where just putting people in cars that weren't there at the time of accidents, low speed impacts. I think the economy then drives that sort of element, and making sure brokers are educating their customers to be taking pictures at the scene of an accident, looking at damage and capturing it, because a long- term plan is important, but the basics are absolutely still a risk.
00:19:26
Vanessa Baffoe: Well, with that in mind, we'll bring this episode of Insurance Tomorrow to a close. I want to say a massive thank you to Matt Crabtree, who's head of Financial Crime Intelligence and Investigations at Allianz UK, and also to Craig Kennedy, who's partner and head of Cyber Consulting at national law firm, HF, for your valuable insights on navigating this rather complex landscape. And a huge thank you also to you for joining us, and don't forget, you can subscribe through your normal podcast app so you never have to miss an episode. And while you are there, why not leave us a review? We'd love to hear from you. Until next time, see you soon.
