This page considers insurance referencing in Australia,
ie industry-wide and enterprise-specific identification
of whether insurance consumers are good risks.
It covers -
note that this site is wholly independent of the insurance
referencing sector. We do not act for any of the services
and contrary to the belief of some readers cannot make
your insurance reference problems disappear.
Insurance is a fundamental aspect of Australian personal
and business life, both because it can relieve some pain
when things go wrong and because insurance cover is often
a requirement for operation of a business or access to
finance. The absence of finance may have a crippling effect.
Access to insurance at what the consumer considers to
be punitive rates may also be detrimental.
The life and general insurance industry, which historically
has been quite profitable (significantly more so than
the operation of overseas-based parent corporations),
has argued that it faces substantial difficulties because
of customer dishonesty.
In 1994 the Insurance Council of Australia (ICA) estimated
that up to 10% of all insurance premiums paid by the public
were lost to fraud. Tony Baldock in a report for the Australian
Institute of Criminology notes a study reporting that
9% of 8000 insurance
proposal forms did not disclose the applicants' full claims
history and that a further 2.5% had "adverse credit
and public record information on file".
The industry, like its overseas peers, has responded in
The first is to maintain enterprise-specific blacklists.
If your relationship with the particular insurer has been
'suspicious' or 'adverse' (eg 'too many' claims or disputed
claims) you either will not receive insurance from that
provider or will pay a premium.
A second response has been sharing of information between
insurers regarding past contact with 'bad' or 'suspect'
customers. That sharing is feasible because of the oligopolistic
nature of the Australian industry, with a large number
of brands and agents but a small number of insurers, many
of which have the same parent.
A third response, of increasing significance, is for insurers
to rely on data provided by third parties - such as the
information brokers discussed here
- and to engage in predictive
assessments using algorithms that may result in inappropriate
discrimination rather than maintaining the industry's
viability (and ensuring that law-abiding consumers do
not carry the burden attributable to fraudulent claims).
Insurance referencing is one of the more obscure parts
of the insurance or finance industries.
Veda Advantage, the behemoth discussed earlier in this
profile, has an arrangement with Insurance Reference Services
Ltd (IRS), an Australian insurance industry referencing
agency. Veda's annual report boasts that it has commercialised
data from IRS since 2001.
IRS was established in 1991 by the major insurers as a
not-for-profit central register of insurance claims, levering
the database operated by the Credit Reference Association
of Australia since 1984. By 1995 its database covered
11 million claims (with an average 45,000 enquires per
month), climbing to 18 million claims by 2002.
IRS boasts that it is -
only national database of insurance claims. It offers
an easily accessible record of insurance claims by individuals.
Some insurance companies use this database in deciding
whether to accept an insurance proposal or as part of
the investigation process when a claim is made.
claims that its -
claims database provides insurers with an invaluable
tool for the identification of fraudulent claims, the
verification of claims history and as a measure of the
membership comprises most general insurance companies,
which report claims to IRS and access to its databases
to identify the claims history of consumers.
IRS is regulated by a voluntary code of conduct. Clause
2(b) of that Code requires insurers to disclose membership
of IRS to consumers and advise that personal information
may be passed on to IRS. If a proposal or claim is refused
principally on the basis of information from the IRS database
the insurer is expected to notify the consumer and indicate
that a copy of the file may be obtained by writing to
IRS. Consumer queries must be investigated by the IRS.
Membership of IRS as of 1995 included the largest domestic
insurers (ie home & contents insurance) and most commercial
insurers (eg plant and business premises), including AAMI,
AIM, American Home Assurance, AMP General, Australian
Alliance, Catholic Church, CIC, Club Marine, Colonial
Mutual General, Commercial Union, FAI, GIO Australia,
HBF, Lumley, Mercantile Mutual, MLC, MMI, Mutual Community,
NRMA, NZI, QBE, RAA, RAC, RACQ, RACT, RACV, SGIC-SA, SGIO-WA,
Sun Alliance & Royal, Suncorp, TIO, VACC, Western
Underwriters and Zurich.
It also included 130 insurance assessors, loss adjusters
and claims investigators.
There have been no major studies of insurance referencing.
Two works are Tony Baldock's 'Insurance
Fraud' (Trends & Issues in crime and criminal
justice No. 66, 1997) (PDF)
and 'The insurance reference service - An overview' by
Bruce Bargon in 2 Privacy Law and Policy Reporter