A Recipe for Change: CCOR, NICB, CAIF, IASIU?

This journey promises to be much different. Where exactly we are going and what we hope to find may be anyone's guess for now, but some things are sure to change. Reshaping the way the industry fights fraud is going to require collaborative critical thinking and creative ideas. Not just from any one company, group, or organization, but from a cross section of the industry's knowledge domain in the area of fraud. After all is said and done, it may look much different than it does today. But if we set course for a new direction, we must reach our destination this time. All of this will depend on a number of factors coming together. In order to see what may be in store for the future, we need to take a look at what has taken place in the past, and review current efforts underway now to create a new fraud-fighting organization once again.

The Diagnosis

As early as 2004, insurance fraud was a critical concern of the Chief Claim Officers Roundtable. The CCOR group gathers periodically, with meetings coordinated and facilitated by the consulting firm McKinsey & Company. McKinsey is a privately owned management consulting firm that focuses on solving issues of concern for top senior management in large corporations and organizations. McKinsey suggests their work and research in this area, for the most part, has been pro bono in support of an important issue facing the insurance industry today. What a noble cause, indeed.

The group worked during 2005 to explore opportunities to mitigate the impact that fraud has on the industry and on consumers. Although it remains unclear if any of the research disclosed anything new, some of the findings that surfaced from the group reaffirmed that P&C fraud alone was a $30 billion problem annually, with little change made to the landscape over the years. The industry currently does not share sufficient data to stem fraud effectively, and consumer awareness of the problem has not reached a level sufficient to change public attitude toward fraud. Further, ongoing industry anti-fraud activities have not been successful in all areas, and efforts by current organizations to address fraud have been fragmented or duplicated. The group also believes that no optimal governance structure exists to effectively coordinate industry and organizational anti-fraud activity. This was certainly not a very encouraging diagnosis.

Call for Action

At its annual meeting in January 2006, the CCOR group reviewed some of the findings and authorized a committee of chief claim officers to take action on some of the proposed recommendations, with three focus areas identified:

1. Improve fraud data collection, data sharing, and data analytics within the industry;
2. Strengthen the governance over the industry's fraud-fighting efforts; and
3. Assess the industry's historical public relations and awareness activities to identify any opportunities for improvement.

Three CCOR subcommittees were established to pursue each of the initiatives, and were led by various members of CCOR. Subcommittees then created working sub-groups to focus on a build-out of these key areas.

Information Sharing

The goal of the CCOR data subcommittee was to improve the content of the all-claims database and questionable claim submissions, and to leverage the all-claims database as the central repository to the industry. During 2006, the data sub-group made significant progress toward identifying industry data analytics and access needs. It developed eight recommendations that were proposed to ISO for review and potential implementation.

One of the high-impact recommendations is the ability for companies to conduct broad-based searches across ClaimSearch, the industry's all-claims database, and return large amounts of records on which to perform analysis. This would level the playing field for most companies that currently use data analytical tools other than ISO's proprietary applications. ISO has not always been receptive to such ideas. The ISO data piece of this initiative was long overdue. Kudos to the industry subject matter experts in the data sub-group and to the CCOR members for elevating this to an industry priority and calling ISO to action. The business associated with casualty and property indexing has come at an enormous cost to the industry over the years. For the most part, many of the enhancements and add-on features integrated with ClaimSearch also have come at a premium add-on price.

Public Awareness

Later in 2006, the CCOR public awareness subcommittee also began an initial assessment of the industry's public relations, awareness, and communication efforts relative to fraud. Little is known or reported about the efforts of this CCOR sub-group. So it's unknown if these efforts had much depth or were simply melded into the broader focus of the fraud governance team efforts. Prior to this effort, CAIF and CCOR co-sponsored an outreach summit in Washington, D.C. in Sept. 2005, discussing public outreach efforts. Who would have known that in 2006 CCOR would ask CAIF to consider a proposed merger with NICB and IASIU?

The result of that joint sponsorship summit was a white paper published by CAIF called United We Brand. It provided a vision for branding insurance fraud and a blueprint for a national insurance fraud public outreach program. Public outreach about fraud has been the mainstay of CAIF, and to a lesser extent, the NICB. One of the vast differences, however, between these two organizations is the constituents they represent. CAIF, unlike NICB, has a board make-up that includes a unique alliance of consumer interest groups, government agencies, and insurers.

With just a few people on the payroll and a very limited budget, CAIF has made real progress in the media relations and government affairs arena over the years. CAIF has been able to personalize the problem by putting a face on fraud in the media. They have been instrumental — and successful — in lobbying and legislative efforts. CAIF is focused, has developed expertise, and most importantly, has earned resounding creditability with its anti-fraud legislative and consumer outreach activities. With more resources and greater support, CAIF's capabilities could be unparalleled and unimaginable in scope.

Fraud Governance

The CCOR fraud governance team pursued the primary recommendation of consolidating the three major industry fraud organizations — the alphabet soup organizations CAIF, NICB, and IASIU — in order to improve the industry's fraud-fighting efforts. Discussion took place with the three organizations to investigate the possibility of a three-way merger. A sub-working group of CAIF, NICB, and IASIU representatives was formed to lay out the specific details of a potential merger plan. The goal of the CCOR governance committee was to create a new industry organization that would improve the industry's fraud-fighting efforts by creating an optimal governance structure.

The appetite for a merger as a solution to the industry fraud problems did not sit well with some of the organizations. Many struggled with the business rationale and lack of a benefit analysis for creating a new organization by merging existing entities. Some felt that fraud issues had not been fully explored leading up to this direction, and industry subject matter experts and organizations who know fraud issues best were not engaged early on in the process. Others felt discussions were directed entirely toward the structure of the new organization rather than developing what an ideal fraud-fighting entity for the industry should look like. The group forged ahead, but working under this direction, started to erode the overall effort.

Editor's Note: The preceeding article was reprinted with permission from the IASIU membership publication, SIU Today.

David J. Rioux, CIFI, is vice president and manager of the Corporate Security Department – Investigative Services Section for Erie Insurance. He can be reached at david.rioux@erieinsurance.com.