5 Reasons Why Insurers Should Start With Automated Fraud Detection

Mar 9, 2023

5 reasons why insurers should digitize image
5 reasons why insurers should digitize image
5 reasons why insurers should digitize image

The shift to digitization is real. Across the globe, insurers are modernizing core systems, starting online channels, and replacing manual tasks with automated ones. From a consumer perspective, there are a number of requirements that insurers should take into account. Those range from the speed of service, via a fully digital experience, to a seamless integration of products. Thus, bringing in new risks to cope with. The internal process changes, as well as the way insurers look at fraud management (fraud detection and fraud prevention). Automating fraud detection is key. Here are 5 reasons why insurers should start with automated fraud detection:

1. Increase the Chances of Detecting Fraud and Limiting False Positives

When detection methods are automated and standardized, the chances of detecting fraud are increased and false positives are limited to a minimum. Fighting fraud can be a time-consuming and error-prone process. Your employees should work on customer satisfaction or investigate just those cases with the highest fraud probability. Money will flow to claims that are valid, saving the organization and customers from the costs of fraud. Eventually, the loss ratios will drop as well.

2. Claims Automation; Enable Straight-Through Processing (STP)

Leverage the advantages of STP. It is virtually impossible to screen all incoming claims manually. Let alone keep up with high and constantly changing compliance standards. Automating the process by scoring screenings via a predefined model helps. The claims that score below a set benchmark can immediately be paid out. Only claims that score above the benchmark need to be looked at. This could be done by either senior claim handlers or by a member of the Special Investigations Unit. Automated tools will leave less room for fraud. Also, they potentially enable a 100% STP of claims and policy applications.

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3. Create More Efficient Fraud Investigations

By directly recognizing claims that need further attention or require active follow-up, organizations with the trust automation solution are more effective at fraud investigations, because the correct information is handed over to the fraud investigators. They can spend their time on cases that actually require attention. Fraudsters will receive a hard time, as the case against them can be built effectively. It gets even better when all information can be stored in a controlled environment like a fraud pool. This might enable the sharing of claims and fraud data with other insurers. Via cooperation insurers are able to work together in preventing fraudsters from hopping from one insurer to the other.

4. Objectify Screenings

When a case gets forwarded to the special investigations unit, there is always a reason. However, sometimes the reason is just a gut feeling of a claims adjuster. Nowadays, more and more techniques are developed to detect unwanted biases. With an automated system, the influence of bias and/or prejudice when investigating data is limited. This will improve the quality of analyses. Thus, the managerial decisions that are based on them will be better.

5. Make Better Underwriting Decisions.

Often, precious time gets lost when people in the claims department need to constantly ‘mop the floor’. When fed back into the organization, data from the claims process could be quickly analyzed and compared with information of new applicants. Combining these two processes gives a strong estimation of the applicants’ potential future behavior. When risk analyses are already implemented in the underwriting phase, it is possible to stop fraud ‘at the gate’. High risks can either be stopped from entering the portfolio or they might receive risk-based pricing. Especially for an online channel, automating the underwriting efforts brings significant benefits.

Trust Automation Platform

These 5 challenges are only a high-level indication of what can really be done when automating fraud detection and risk assessment. The good thing is, starting with automation does not mean that other processes need to be paused. There are a few out-of-the-box systems that can be up and running within weeks. Effective fraud fighting is at hand. With just a little help from smart software, insurers can focus on healthy portfolios and happy customers. As long as they are willing to embrace digital and innovative technology.