Fighting fraud with private prosecutions

This article was first published in Insurance Age, and the original article can be found online here.

Ashfords argues that brokers should encourage insurers to bring private prosecutions in some fraud cases.

There has been a recent uptake of private prosecutions by those in the insurance sector, covering situations as diverse as cash-for-crash scams to false work injury claims.

Brokers should encourage their insurers to bring private prosecutions when criminal proceedings don’t come to fruition and if the right evidence is there.

So what are private prosecutions, how do they work, and what impacts might they have on the sector?

Any person, corporate or otherwise, can institute criminal proceedings, known as private prosecutions.

Private prosecutions are usually brought because authorities such as the Police chose not to investigate or cannot due to a lack of manpower, funds or expertise. Therefore a private prosecution can be used to fill the gap where authorities either cannot or will not prosecute.

Failure to conduct these proceedings correctly can result in the prosecution being stopped by the head of the Crown Prosecution Service; so it is important the correct procedure is followed.

It is best practice to follow the Code for Crown Prosecutor’s Full Code Test before deciding whether to bring a prosecution. The test is designed to ensure that there is sufficient evidence to prosecute, and that doing so is in the public interest.

Insurance fraud is likely to be in the public interest to prosecute but sufficient evidence must be collected to ensure the case passes the high evidential standard required in criminal cases. Failure to do so can result in the prosecution being stopped.

A private prosecutor will therefore need sufficient evidence at an early stage. However, they generally cannot obtain a search warrant unless the police provide assistance, cannot arrest or interview suspects without their consent, and cannot compel a suspect to answer questions.

Without the ability to gather evidence on their own it is likely that private investigators and other experts will be needed in order to demonstrate a case.

This difficulty involved in obtaining evidence should not dissuade insurers from utilising criminal prosecutions to combat fraud, and the benefits should persuade brokers to suggest their use to insurers - especially those large enough to suffer from regular fraudulent claims.

Firstly, criminal cases are generally quicker to resolve than civil cases, taking between 6 - 18 months to conclude, and can be less costly.

Benefits such as cost recovery and the deterrence of criminal convictions can result in a successful prosecution resulting in some of the insurers’ costs being covered, and future frauds deterred thus reducing the damaging impact that fraud has on the industry.

Moreover, the criminal courts are able to imprison defendants for fraud as well as order the confiscation of assets and compensation, whereas civil courts focus on recovery of money lost.

On that basis, whilst not a common tool used by insurers, brokers should encourage insurers to bring private prosecutions to help reduce the impact of fraud to the insurance industry. 

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