1 Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 1/3X du bord; X = logotype) The war on life insurance FRAUD Violeta Ciurel CEO AXA Life Insurance 29 Oct.2012

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) What is a FRAUD? 2 The Institute of Internal Auditors International Professional Practices Framework (IPPF) defines fraud as: …any illegal act characterized by deceit, concealment, or violation of trust. These acts are not dependent upon the threat of violence or physical force. Frauds are perpetrated by parties and organizations to obtain money, property, or services; to avoid payments or loss of services; or to secure business advantages. National and local governments, especially in the last half of the twentieth century, have recognized insurance fraud as a serious crime, and have made efforts to punish and prevent this practice.

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) What are main sources of LI frauds? Frauds might be driven: either by A. DISTRIBUTION network (INTERMEDIARIES DRIVEN FRAUD) Proprietary channel – tied agents Non-proprietary channels – brokers or by B. CLIENTS of the Life Insurance company (CONSUMER DRIVEN FRAUD) 3

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) Fraud categories A – Distribution driven frauds: – Commissions driven sales - miss-selling – Fake insurance proposals / clients sent for policy issue – No payment of cashed premiums paid by clients – No communication of policy terms & conditions before sign-off – Fake simulations of policy account evolution in front of the customer B – Consumer driven frauds : – Fraudulent claims sent by the client – Failure of policyholder to disclose important information about medical lifestyle or conditions, health history, financial status (fake client declarations in the uw questionnaire) – Misrepresentation – policyholder do not fully disclose the seriousness of a medical condition in application – Intermediary involvement in providing fake documents 4

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) What is the difference between Hard and Soft frauds? Hard Fraud occurs when someone deliberately plans or invents a loss Soft Fraud (opportunistic fraud) occurs when policyholder exaggerates otherwise legitimate claims, or when, while obtaining a new policy, misreports previous or existing conditions in order to obtain lower premium 5

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) Global economic crime survey 2011 (PWC) – main highlights: 34% of respondents experienced economic crime in the last 12 months - 13% increase from 2009 Almost 1 in 10 who reported fraud suffered losses of more than US$5 million Cybercrime now ranks as one of the top four economic crimes Reputational damage resulting from cybercrime is the biggest fear for 40% of respondents 40% of respondents dont have the capability to detect and prevent cybercrime 56% of respondents said the most serious fraud was an inside job Senior Executives made up almost half of the respondents who didnt know if their organization had suffered a fraud In today's technology driven environment, cybercrime is emerging as a serious threat to organizations. NB: The 2011 Global economic crime survey was completed by 3,877 respondents from 78 countries, making it one of the largest and most comprehensive studies of economic crime available to businesses. 6

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) Dramatic Situation – fraud statistics Coalition Against Insurance Fraud (US) ! Consumer tolerance has increase over the last 10 years: 4 of 5 adults think insurance fraud is unethical (CAIF, 2008) 1 out of 4 Americans says its ok to defraud insurers 8% Americans say its quite acceptable 16% say its somehow acceptable (Accenture 2003) 1 in 10 people agree its ok to submit claims for items that arent lost or damaged or personal injuries that did not occur (ibid) 82% Americans think its unethical to misrepresent facts on insurance application to lower premiums 85% Americans think its unethical to file a claim for damage that occurred before coverage 84% Americans think its unethical to misrepresent an incident in order to be paid for an uncovered loss (Four faces study) ! People who believe cheating and lying are necessary to succeed in life, are more than 3 times more likely to inflate insurance claims (Josephson Institute, 2009) 7

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) Statistics on losses due to insurance fraud Approx. USD 80 bill loss in US due to insurance frauds (Coalition Against Insurance Fraud estimates of 2006) Insurance frauds count for 10% of P&C insurance industrys losses (Insurance Information Institute) 3% up to 10% - approx. USD 115 bill of yearly health care industry expenditures in US are due to fraudulent activities (National Health Care Anti-Fraud Association) Approx. USD 3 bill loss due to insurance frauds estimated for UK (Insurance Fraud Bureau) Approx. C$ 500 mill/year personal injury frauds in Canada (Insurance Bureau of Canada) 8

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) How to react to this situation? 5 ways to protect organization against economic crime: 1. Know who you are dealing with – staff, suppliers, partners and agents 2. Align IT, Internal Audit and the Board in the fight against economic crime 3. Conduct regular fraud risk assessments 4. Leadership by a Cyber-Savvy CEO, who instills a cyber risk- aware culture 5. Implement a cyber crisis response plan 9

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) FSA initiatives on Financial Crime prevention – focusing on maintaining market confidence, consumer protection and public awareness UK Threat Assessment (UKTA) made by Serious Organized Crime Agency (SOCA) Financial Action Task Force (FATF) Reports and measures for the insurance sector aiming to improve money laundering International Association of Insurance Supervisor (IAIS) Report on the survey on preventing, detecting and remedying frauds in insurance (launched in 2007) 10 Regulators tackling Frauds

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) Define and put in place specific strategies to combat frauds Improved fraud detection measures and reporting mechanisms Develop anti-fraud policy and dedicated functions Hall of Shame (US practice) 11 Best practices around the Globe

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) How is AXA Group dealing with it? 12 Global French insurance group AXAs own research shows fraud theft rising 12% from 2009 to 2010, while according to the Association of Certified Fraud Examiners (ACFE), 2009 had a potential total fraud loss of more than $2.9 trillion. To help solve this pernicious cycle AXA has adopted BAE Systems Deticas NetReveal anti-fraud product. NetReveal is an analytics system that detects hidden relationships that would otherwise be easily missed in large amounts of data

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) Insurance fraud in Romania CSA received and solved during the first nine months of 2011 a total of 4888 complaints about the activities of insurers: Overall level of complaints have dropped 15% over the same period last year 95.93% were registered for general insurance 4.07% for life insurance (199 complaints) RCA claims accounted for 73.59% (3597 cases) while RCA represents only 0.08% of the total contracts signed, or 1.4% of open claim files Proven fraud are resolved amicably or in court. Many of those guilty give up in writing to waive compensation, when faced with clear evidence, sure that there are other complaints to challenge the evidence by the Insurance Supervisory Commission (CSA), cases that are over usually in court. 13

Pour personnaliser le pied de page « Lieu - date »: Affichage / En-tête et pied de page Personnaliser la zone date et pieds de page, Cliquer sur appliquer partout Encombrement maximum du logotype depuis le bord inférieur droit de la page (logo placé à 2/3X du bord; X = logotype) THANK YOU ! 14