SPECIAL FEATURE: Combating fraud
Renting homes without permission from lenders was the biggest driver of mortgage fraud in the first six months of 2013. Furthermore, mortgages account for the highest rate of fraudulent applications across all financial services. Some 15 out of every 10,000 applications were fraudulent back in 2006. Experian’s data shows that this rose to 31 in the first half of 2013 and this could well increase if the warning by the City of London Police that the government’s Help to Buy scheme could cause a sharp rise in such fraud holds true.
Fraudulent activity is just as big a problem in the general insurance industry. Latest estimates suggest that fraud costs the industry some £3bn a year with only £1bn of that actively detected by insurers. Fraud accounted for 11 in every 10,000 applications in 2012. While final figures for 2013 haven’t been released yet, I wouldn’t be surprised to see them go up again.
The proliferation of mobile and online channels has contributed to fraudulent application activity however insurers have invested significant time and money in people and technology to prevent, detect and prosecute fraud. The larger online and call centre-based brokers have also stepped up to the plate implementing fraud prevention measures at the front end.
As a result, significant inroads have been made in identifying organised fraud at the application stage. However, as these measures have proved successful, perpetrators of fraud are moving to ‘softer’ targets that may not have sophisticated deterrents in place according to one leading insurer.
In many cases, that means high street insurance brokers… and just as they are seemingly becoming front line defence for insurers, so are mortgage intermediaries.
However, you don’t have to spend a fortune on some basic measures to protect against fraud. The ID checking process for mortgage applications does support the verification of names and addresses for example. However there are some softer skills such as conversation management techniques that you can develop to try and spot the signs that a customer might not be telling the whole truth.
Getting the customer to tell their story can help spot a fraudster through their potentially deceptive behaviour such as:
• A vague story, missing aspects, contradictions and lack of detail
• Uncooperative, angry or abusive behaviour
• Evasive tactics such as changing the subject, answering a question with a question, or blaming their memory for their answer
• Struggling to provide more information and repeating details already given
• Hesitation, broken speech or changes in voice pitch and/or speed
Using conversation management skills can help prevent possible fraud and it is worth considering specialist training. Delivered correctly, it gives the potential fraudster the opportunity to recognise they have been caught out and withdraw before they commit a crime – and hopefully change their mind and tell the truth!