It is a common perception that insurers can be quick to decline cover. Recent publicity of an overly keen loss adjuster will only add fuel to that jaundiced view of insurers' approach to their legal and regulatory obligations.
A loss adjuster, acting for his insurer clients, illegally obtained financial information to ascertain whether the insured had the funds to bring legal action if cover was denied.
Earlier this year record fines of more than £150,000 overall were imposed under the Data Protection Act 1998 on loss adjuster Woodgate and Clark, an ex-director, another senior employee, and 2 private detectives who were hired by the loss adjusters. They all illegally obtained the private banking records of an individual they were investigating. They obtained details of a mortgage, account balances and loans from Natwest and Abbey National in 2005 for an insured whose night club had burned down in 2004.
This case was the first conviction following an enquiry by the Information Commissioner's Office (ICO) into the use of private detectives by companies.
The ICO is investigating the use of 'blue chip hacking' and 'blagging' for illegally obtaining private information. Blue chip hacking includes phone and computer hacking, live phone interceptions and use of police officers. 'Blagging' involves deception techniques such as telephoning a bank, government department, or other organisation that holds private information, and posing as an internal colleague of the company or the individual under investigation to obtain private data. The outcome of this prosecution is a stark reminder that these illegal techniques are under the microscope of the ICO and can attract hefty fines.
It is understandable for insurance companies to investigate claims where they suspect that a claim is either fraudulent or deliberately exaggerated. In some cases extensive investigation may be merited, such as surveillance ranging from video recording, possibly over a number of days, and searching online social media sites to see what information can be obtained. Whilst there are occasions where such investigations might be necessary, the actions of this loss adjuster were obviously wrong. The law on data protection has been in place for 20 years and of course with new regulations coming into force on 25 May 2018 the consequences of the misuse of data in this way will only be intensified.
The unanswered question is whether the insurance company knew what their loss adjuster was doing. One would expect not, although some of the information being fed back to the insurance company may well have been so detailed and obviously confidential that the recipient perhaps should have been on notice of some ill-advised practices. The court found that the director and senior loss adjuster at Woodgate and Clark must have known that the information could not have been obtained legitimately.
Insurers have a duty to treat their customers fairly and these types of practices by their personnel, even indirect personnel, would fall far short of that, quite apart from the data protection issues. Policyholders have rights to complain to the Financial Ombudsman and to take legal action if these types of practices are suspected.
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