This article was originally published on Your Money
Market research company Consumer Intelligence found that asking insurance customers at the start to state the answers on their claims form will be honest rather than at the end could cut nearly £100m off the £1bn a year cost of fraudulent claims.
Fraud is estimated to cost every insurance customer around £50 a year as companies increase premiums, adding up to a total cost of around £1bn.
The report Honesty: what makes consumers lie and how to make them tell the truth used behavioural psychology theory and consumer research to demonstrate that insurers can improve service to customers and cut dishonest or inaccurate claims.
In controlled experiments among insurance customers the survey found that people lied more to insurers than on average but that dishonesty fell by 9.5% when people were asked to be honest before supplying information.
Ian Hughes of Consumer Intelligence said: “Asking consumers to be honest drastically reduces dishonesty and the simple and powerful lesson for insurers is that it is a way to reduce fraud and ultimately premiums for customers.
“There are a number of quick and easy measures insurers can take to use behavioural psychology in their favour. That can include reminding people of their need to be honest and not asking questions that force them to be creative such as the exact value or measurement of a lost item. If people don’t know they have to guess and once they start guessing it is hard to stop.
“Consumers should be asked to indicate they will be honest at the beginning of a process to put them in the right mind-set before providing information.
“Insurers should also think carefully about complaining about fraud publicly – if they are talking about Britain being the whiplash capital of Europe some people will instinctively think that it is more acceptable to put a false whiplash claim in because so many other people are doing so.”
The report highlighted that an area where people display the most dishonesty is in declaring their annual mileage – someone may drive 12,000 miles, but only declare 10,000 miles, thinking they can drive a little less to make this true. They have provided incorrect information but not an extremely low answer.
