Does technology drive fraud and theft?

In February CPP looked in more detail at the issue of mobile phone insurance fraud and theft. The results were interesting and confirmed some long-held assumptions that there is a small minority who think it is totally acceptable to file a fraudulent insurance claim for financial gain.

So, just how many? Eight per cent of respondents said they knew ‘someone’ who had made a fraudulent claim to get the latest handset. CPP’s experience of claims management would actually say this figure – although bad, is less then what we would normally expect with fraudulent claims running between 10-12 per cent.

When we broke these numbers down, it would seem that men know more dishonest people then women and those aged 18-24 are six times more likely to know ‘someone’ who has made a fraudulent insurance claim opposed to the over 55s.

Given handsets are becoming more and more expensive, and smart phones are now building significant volume, claims departments are going to have their work cut out identifying fraudulent applications, whilst maintaining high levels of customer satisfaction and claims ratios. Interestingly, when we looked at mobile phone penetration, it is the 18-24 age group who are most likely (27%) to have mobile phone insurance verses only nine per cent of 55-65 year olds. No doubt driven by the increasing use of smart phones and the realisation that some form of cover is required for expensive handsets that now carry, in many cases, a minimum 18 – 24 month contract.

Between May and June 2009, CPP also saw an 11 per cent hike in the number of phones reported missing or stolen, which coincided with the release of the new iPhone 3G. Whilst nothing can be proven, and some may say that the summer is more likely to see an increase in lost, stolen and damaged handsets due to people been more active, one insurance provider has reported that claims for Apple’s iconic phone typically jump by 50 per cent during the month in which a new version is launched and four in ten of these claims is ‘suspicious’.

With four per cent of people tempted to report their mobile phone lost or stolen to get a new upgrade and 12 per cent prepared to damage, lose or take less care of their handset in order to get a new model, we have a situation where insurance fraud for some is considered fair game.

Separately, when we asked what is driving phone theft, the perception is that mobile phones are an easy and valuable commodity, which can be easily sold on and that children target other children. This is consistent with the British Crime Survey 2007/08, which reported the under 24s are most at risk from mobile phone theft, accounting for almost half of phone-related crime.

Concurrent with the increasing penetration of smart phones, there is a perception that mobile phones hold valuable data and this is helping to drive phone-related crime. This point is likely to increase as more consumers migrate to mobile banking and e-shopping via their handsets. As mobile and traditional payment devices ultimately converge with the adoption of near-field-communications, the handset will become a payment device that is by its very nature highly visible and potentially vulnerable. And most recently we have news that technology is being developed to allow people to open their car and front door using their mobile phone. With 84 per cent of victims of theft not getting their handsets back, consumers are going to have to take more responsibility to protect this increasingly valuable ‘lifestyle’ asset.