Cracking Down on Insurance Fraud The State Administration of Financial Supervision plans to introduce new measures

Reporter Chen Jingjing reports from Beijing

Cracking down on insurance fraud, purifying the insurance market environment, and maintaining social security and stability are important links in social governance. In recent years, there has been an increasing number of insurance fraud cases involving gangs, professions, and cross-regional and cross-agency cases.

In order to prevent and resolve the risk of insurance fraud, protect the legitimate rights and interests of insurance consumers, and promote the high-quality development of the insurance industry, the State Administration of Financial Supervision and Administration (hereinafter referred to as the "State Administration of Financial Regulation") has drafted the Measures for Anti-Insurance Fraud (Draft for Comments) (hereinafter referred to as the "Solicitation of Comments") and has made it available to the public for comments.

The person in charge of the relevant department of the State Administration of Financial Supervision publicly stated that part of the current "Anti-Insurance Fraud Guidelines" no longer meets the needs of the current anti-fraud work. To this end, the State Administration of Financial Supervision has drafted the "Solicitation of Opinions", emphasizing top-level design, strengthening overall planning, highlighting the protection of consumer rights and interests in anti-fraud work, strengthening technology empowerment and big data application, and promoting a new model of big data anti-fraud work.

The reporter of "China Business Daily" noted that the "Solicitation of Opinions" has a total of 6 chapters and 37 articles, making it clear that the goal of anti-insurance fraud work is to establish a four-in-one working system of "supervision and guidance, institution-oriented, industry joint defense, and coordination of all parties", the anti-fraud system and mechanism are basically sound, the momentum of fraud and crime is effectively curbed, the industry's fraud risk prevention and resolution ability has been significantly improved, and consumers' anti-fraud awareness has been significantly enhanced.

The reporter learned from people familiar with the matter that the regulatory departments of some provinces have issued a special implementation plan for the centralized rectification of insurance fraud, and the public security economic investigation departments will promptly accept and carry out verification of cases reported by insurance institutions that reflect suspected insurance fraud and large amounts, or cases involving vehicles, more personnel, and greater social impact, and file and investigate cases with conclusive evidence in accordance with the law, and severely crack down on insurance fraud criminal activities.

Clarify anti-fraud responsibilities and tasks

According to a set of data released by the Shunyi District People's Court in Beijing, from January 2019 to October 2023, the Shunyi Court heard 26 cases of motor vehicle insurance fraud, involving 52 people. From the perspective of fraud methods, about 88% of insurance claims were fraudulently obtained by forging or deliberately creating insurance accidents, and about 12% were found to defraud insurance after an accident.

Insurance fraud refers to the act of using insurance contracts to seek illegal benefits, mainly including deliberately fabricating insurance objects and defrauding insurance money, fabricating insurance accidents that have not occurred, fabricating false accident causes or exaggerating the extent of losses to defraud insurance money, and intentionally causing insurance accidents and defrauding insurance money.

According to the Consultation Paper, insurance institutions should establish a full-process fraud risk management system, and gradually improve the workflow of multi-party early warning in advance, intelligent management and control during the event, and retrospective management after the event. Insurance institutions and industry organizations shall, in accordance with the division of responsibilities, coordinate network security, data security, and innovative development, perform security protection obligations in accordance with law, improve management systems, strengthen network security and data security protection, ensure necessary personnel and resource investment, and adopt network security, data security management, and technical measures to ensure the safe and controllable operation of anti-fraud information systems.

Insurance institutions shall bear the main responsibility for fraud risk management, establish and improve fraud risk management systems and mechanisms, standardize operational procedures, improve information systems, properly handle fraud risks, strengthen industry collaboration, carry out anti-fraud communication training, publicity and education, and fulfill reporting obligations. The fraud risk management system of an insurance institution shall include effective supervision and management by the board of directors, the board of supervisors (supervisors) or the professional committees performing the duties of the board of supervisors, and the management; Monitoring and disposal procedures, internal control and supervision mechanisms, fraud risk management information systems, anti-fraud training and talent team building, anti-fraud publicity and education, participation and cooperation of anti-fraud coordination mechanisms, honesty and trustworthiness and compliance culture construction and other basic elements.

Insurance institutions should formulate a fraud risk management system, clarify the roles, responsibilities and reporting paths of the board of directors, the board of supervisors (supervisors) or the professional committees performing the duties of the board of supervisors, management, the person in charge of fraud risk management and the anti-fraud functional department, standardize the operation process, and strictly evaluate and implement the accountability system.

In addition to establishing the above-mentioned systems and mechanisms, the Consultation Paper further requires that insurance institutions should regularly evaluate the effectiveness of the fraud risk management system based on comprehensive consideration of factors such as business development, technology updates and market changes, and determine whether relevant strategies, systems and procedures need to be updated and revised based on the evaluation results. Insurance institutions shall submit an evaluation report on the effectiveness of the fraud risk management system for the previous year to the State Administration of Financial Supervision or its dispatched agencies in the first quarter of each year. The provincial-level branch of an insurance institution shall submit an evaluation report on the effectiveness of the fraud risk management system in accordance with the requirements of the local dispatched agency.

In terms of internal control, risk identification, assessment, disposal, information system and data management, publicity and education, the Consultation Paper also sets out detailed requirements, such as insurance institutions should establish an anti-fraud risk management information system or embed the existing information system into relevant functions, and do a good job of connecting the internal standards of business element data with industry standards to ensure the authenticity, completeness, accuracy and standardization of fraud risk management-related data. Insurance institutions shall handle and use consumers' personal information and industry data in accordance with the law to ensure data security and completeness.

Insurance institutions carrying out agricultural insurance, insurance for the first (set) of major technical equipment, insurance for the first batch of application of new materials, and other types of insurance that are subsidized by the financial department shall separately carry out a continuous assessment of fraud risk, and reasonably formulate fraud risk management measures based on the results. Insurance institutions shall strengthen the supervision of the institutions that assist in handling the business, and shall not write off the insurance premiums payable by the policyholders or the insurance premium subsidies given by the government by means of false claims, false expenses, false surrenders, or withholding, misappropriation of insurance funds, or misappropriation of operating funds. It is forbidden for any unit or individual to misappropriate, withhold or embezzle the insurance money that the insurance institution shall compensate the insured.

Strengthen anti-fraud coordination

The person in charge of auto insurance claims of a property insurance company told reporters that the means of "insurance fraud" are now hidden, and the gang characteristics are obvious. For example, in some cases involving automobile insurance, the time of the crime is mostly late at night, the location of the crime is selected as a blind spot for monitoring, and the vehicles are mostly vehicles that have been bumped or have traces of accidents. The perpetrators carefully conspired to falsify accidents, report to the police, apply for claims, submit claim materials, etc., which increased the difficulty of investigation and punishment. There is also the phenomenon of internal and external "collusion" is also more common. Some cases show that the insurance company's internal surveyors and loss assessors provide "professional guidance" for insurance fraud, or provide false supporting materials in the accident investigation and damage assessment.

It is worth mentioning that the losses caused by insurance fraud cases cannot be ignored. According to the "Technology Defines the New Future of Insurance - Research Report on the Application Value of Insurance Technology in China" released by iResearch and ZhongAn Technology, the average comprehensive loss ratio of China's property insurance companies is about 60%, and the annual fraud loss of the insurance industry is as high as 10%-15%.

"Insurance fraud" is related to the interests of many parties, and preventing it also requires the joint efforts of many parties.

In terms of coordination between all parties involved in the fight against insurance fraud, the Consultation Paper clarifies that the State Administration of Financial Supervision and its dispatched agencies shall establish and improve the connection mechanism between anti-fraud administrative law enforcement and criminal justice with the public security organs, people's procuratorates and people's courts, and strengthen cooperation in the unification of the application of law, circulars, information sharing, information release, case transfer, investigation and evidence collection, case consultation, judicial advice, etc. The State Administration of Financial Supervision and its dispatched agencies should strengthen the law enforcement linkage with the public security organs and the people's procuratorates, and carry out joint crackdowns or supervision of key areas, new types and major fraud cases. In addition, the State Administration of Financial Supervision and its dispatched agencies should establish and improve coordination mechanisms with market supervision, judicial administration, medical security and other departments, and strengthen cooperation in information sharing, notification and consultation, clue transfer, exchange and mutual training, and joint law enforcement.

At the same time, the State Administration of Financial Supervision should guide industry organizations such as the Banking and Insurance Credit Company, the Insurance Association of China, and the Insurance Society of China to carry out in-depth industry cooperation, build a mechanism for data sharing and fraud risk information exchange inside and outside the industry, strengthen cooperation in risk disposal, jointly carry out industry actions to combat fraud, organize anti-fraud publicity and education, deepen theoretical research and academic exchanges, and promote anti-fraud work in a coordinated manner. The dispatched agency shall guide local insurance industry associations, insurance institutions and their branches to improve anti-fraud organizations based on actual conditions, and may establish or jointly establish anti-fraud centers and anti-fraud offices with public security organs.

The State Administration of Financial Supervision and its dispatched agencies should strengthen coordination and linkage with local government functional departments, promote the establishment of a normalized anti-fraud communication mechanism, promptly report important regulatory information, key risk clues and major special actions, and strengthen information sharing and law enforcement coordination. The State Administration of Financial Supervision and its dispatched agencies should strengthen cross-border anti-fraud cooperation, establish and improve the framework system for cross-border exchanges and cooperation, guide industry organizations to strengthen communication and liaison with overseas anti-fraud organizations, and carry out anti-fraud cooperation in cross-border entrusted investigations, information inquiries and reports, exchanges and visits, etc.

It is worth mentioning that many parties have taken action, and recently, regulatory departments and public security departments in many places across the country have continued to promote the "sword" special action against insurance fraud and strengthen police and insurance cooperation.

On March 20, the Hunan Provincial Public Security Department, the Hunan Supervision Bureau of the State Administration of Financial Regulation, the Banking and Insurance Credit Company, and the Hunan Insurance Industry Association jointly established the Hunan Provincial Insurance Anti-Fraud Center and officially unveiled it. The Centre is a physical insurance anti-fraud organization dedicated to preventing and combating insurance fraud.

The Hunan Provincial Public Security Department and the Hunan Supervision Bureau of the State Administration of Financial Supervision jointly signed the "Hunan Provincial Cooperation Agreement on Preventing and Combating Illegal Crimes in the Insurance Field", and decided to jointly establish the Hunan Provincial Insurance Anti-Fraud Center to carry out comprehensive and in-depth cooperation in the collection and transfer of insurance fraud clues, major cases and risk notification, data sharing, training and publicity, etc., so as to jointly prevent and crack down on insurance fraud and crimes. The center integrates the functions of clue collection, risk assessment, case research and judgment and verification, and has set up an office and a police office in the Hunan Insurance Industry Association, and the public security organs will be stationed to accept cases from time to time.

On April 12, the Qingdao Supervision Bureau of the State Administration of Financial Regulation, together with the Qingdao Municipal Public Security Bureau, the China Banking and Insurance Credit Company, and the Qingdao Insurance Industry Association, held a seminar on the four-party cooperation mechanism against insurance fraud, and officially launched the "in-depth investigation system" against insurance fraud in Qingdao. Build a cross-provincial, cross-institutional, and cross-insurance query platform, use big data to screen and concatenate insurance fraud clues, fully integrate the data and information of regulatory departments, public security organs, and the insurance industry, and effectively improve the accuracy and timeliness of big data anti-insurance fraud.

(Editor: He Shasha Review: Zhu Ziyun Proofreader: Yan Jingning)