The UK’s Financial Services Authority announced today that it has set up a reporting system designed to reduce the level of financial crime in the insurance industry.

Under the new system insurance firms and intermediaries are being called on to inform the FSA when they suspect criminal behaviour, so that the FSA can decide whether to investigate further. This may arise when an insurer terminates an agency agreement with an intermediary where they see doubtful practice or suspect misconduct. It may also arise where an insurance intermediary has concerns about another intermediary they do business with.

“We are looking to all insurance firms to participate in this scheme and help us beat criminal financial activity in their industry. We want to know when a firm has suspicion or evidence of malpractice so that we can act on it where appropriate. We hope that by sharing intelligence in this way, we can work together to reduce financial crime,” said Stephen Bland, director of small firms at the FSA.

Nick Starling, director of general insurance and health, Association of British Insurers, said, “Insurers do all they can to combat financial crime. We welcome the FSA’s initiative — it will provide insurers with a simple point of contact to raise concerns. I would urge insurers to continue to support the FSA in tackling financial crime and report criminal activity they become aware of.”

The FSA is calling on all insurance firms to supply it with the following information: the name of the firm; details of any individuals involved; details and evidence of the suspected and/or proven financial crime; the names of the customers involved; and a summary of investigations.

Examples of possible financial crime involving insurance fraud include: misappropriation of client money or money held under risk transfer agreements; failure to pass on premiums, refunds or claims; falsifying customer details to obtain insurance business that would otherwise be turned down or be more expensive; and, issuing false cover notes or false certificates of insurance.

Behaviours of this kind have led the FSA to take action against a number of insurance intermediaries, the FSA said. The streamlined reporting system will enable it to target its investigations more efficiently, and where appropriate, take action more quickly against firms which conduct their business in this way.