In a recent advisor webinar with guest speakers Stephen Frank, CLHIA President and CEO, and senior members of the Empire Life claims investigative team, Richelle Feddema and Raman Sharma, our hosts Marc-André Blondeau, regional vice-president of group distribution in Quebec and Eastern Canada, and Michelle Wegner, director of sales enablement at Empire Life, discussed industry efforts to tackle group benefits fraud. In this post, we share some of Marc-André and Michelle's post-webinar conversation with Stephen. Next week, we'll share their conversation with Richelle and Raman.
Michelle Wegner: Stephen, you are in your sixth year as president and CEO of the CLHIA—the Canadian Life and Health Insurance Association. What’s changed when it comes to fraud over the past few years?
Stephen Frank: Fraudsters are mounting more sophisticated schemes and, as an industry, we're taking fraud much more seriously. We’re putting more resources into fraud prevention and detection, we’re investing more in technology, and generally spending more energy on combating fraud collectively across the industry. Empire Life has been a huge partner in that, and really a driving force, helping us get to where we are, so I want to thank Empire Life for its leadership in this area. Where we are as an industry compared to three years ago is dramatically different.
Marc-André Blondeau: In our webinar, we asked advisors to tell us what per cent of their customers have asked them about fraud in the past 12 months. The largest response was under 10%. The second largest response was 0%. What’s your reaction to this?
Stephen Frank: That result surprised me a little bit, I'll be honest, and it speaks to the importance of raising awareness. One of the initiatives the CLHIA has been working on with our industry partners is an education campaign. When we first contemplated doing this about five years ago, we decided to start by polling plan members to get their perspectives on fraud. It was surprising then to see how many really didn't understand that fraud is a crime. The vast majority said, "Well, the worst thing that could happen to me is I'll have to pay this back. You know, maybe I'll have to pay $70 back to my employer."
Marc-André Blondeau: The CLHIA came out with your “fraud = fraud” campaign two or three years ago. How has that been received?
Stephen Frank: We intentionally chose as our campaign tagline that fraud is fraud. It's a real crime, and it can have real consequences. As an industry, we paid out roughly $40 billion in insurance claims in 2022. If even a small percentage of that is being wasted in fraud—let’s say 1%—we're talking hundreds of millions of dollars every year. That is a material amount of money. It impacts the sustainability of employers’ benefit plans. It drives cost in the system and makes it more expensive at renewal time. So, everybody has a stake in this—insurance carriers, service providers, employers, plan sponsors, and employees. It's a big ecosystem, and increasingly, we're working together as partners to try and address this issue.
Fraud is not a victimless crime, and you could go to jail if you're involved in fraud. That’s been our message for a few years now. We also want to help people to be able to identify fraud. What does it look like? What do I do about it? As part of the campaign, we promote our anonymous tip line and when we run our campaigns we see an increase in call volumes. So it’s having an effect. Our subsequent polling also shows that people are becoming more aware that fraud's a crime that has real consequences.
We have targeted mostly plan members over the last number of years. Going forward, we are going to broaden this to include provider groups through their trade associations—giving them tools and support to educate their own members. So the whole concept of raising awareness, helping people identify fraud and what to do about it— we're continuing to put a lot of resources behind it, and energy as well, so that will continue over the coming years.
Michelle Wegner: Empire Life has been investing in technologies to identify fraud more quickly. And we’ve been participating in CLHIA initiatives. Can you tell us a little about how these are helping?
Stephen Frank: We’re creating a whole bunch of industry tools to allow our industry partners to come together and better identify and tackle suspicious activity. I’d highlight three initiatives. In 2021, we launched something called the Provider Alert Registry. This is a closed database. It's only open to members who've signed on to some fairly robust requirements on how they can use the data—we've been very conscious of privacy considerations—and it's an area where nonpublic indications or conclusions of fraud can be posted. So if an insurer has investigated a provider and concluded that fraud has happened, they can post that information to the database. And if another carrier has questions about that provider, they can consult the Provider Alert Registry and see if there's a hit. It's a way to share information and cross-pollinate conclusions that have been made in the industry.
In 2022, we launched our Data Pooling Program, which pools all the claims data from all the participating insurers right across Canada. We've got 16 insurers participating currently. Another three will join in 2023. This allows us to do some very sophisticated analytics using AI and other types of data analytical tools to identify suspicious activities that companies may not catch on their own.
Lastly, this year, we launched our Joint Provider Fraud Investigation Program. We just launched this and I'm really excited about it. Essentially, this initiative enables several different carriers to work together to investigate a provider. Instead of each carrier spending a lot of resources and investigative dollars to look into the same provider, carriers can tackle the job collectively. It's allowing us to work together in a cost-effective way, build a really strong case where we can, and ultimately hand it off to law enforcement or deal with whatever we may find.
So I think the message here is we've really elevated our ability to work together. We've elevated our sophistication materially in trying to capture fraud and this is just going to continue. We're going to continue to build our capabilities out in this area. Our journey has really been about education, helping people understand that fraud's a problem, helping them understand what to do about it, and trying to make them part of the solution. We're going to continue to expand our tools. We're going to build out our use of technology. We're going to build our collaboration and investigation side. There'll be more to come there. It's going to become a bigger part of the CLHIA's work and within the industry.
Michelle Wegner: You’ve talked about the ecosystem and all the players involved. What about regulators? What role do they play?
Stephen Frank: We want to have a much better relationship with regulators on fraud prevention. Here in Ontario, the Financial Services Regulatory Authority (FSRA) has a big fraud section that they've built up, particularly around the auto side. But we think there's a lot of things they could do to be helpful. Right across the country, there are opportunities for us to embed ourselves and work as partners with regulators on this issue. We want to develop closer relationships with law enforcement and all the stakeholders in the system. You know, the vast majority—99% of providers—want to do the right thing. Everyone wants to get fraud out of the system, so we want to build that ecosystem and really develop a lot of partnerships.
You know, that's just a big overview. The key message is we're doing way more than we used to as an industry, and partnering with organizations like Empire Life that are really leaders here has been really great for us, and we look forward to doing more going forward.