Roughly 10% of all 2022 losses seen by American P&C carriers can be attributed to fraud. That translates to $308.6 billion. The same $308.6 billion that could’ve been used to hire more employees to improve customer satisfaction, or invest in longterm growth strategies like a cloud-based core system. Instead, dishonest policyholders got $308.6 billion richer. So, how are insurers going to put an end to this?
The first step: Find out how to identify fraud with the 5 best fraud fighting tactics of 2023:
Gut Feeling Isn’t Enough
Fortune 100 companies like Google, Spotify, and Amazon all found success by creating highly automated user experiences. Should Amazon know if you eat avocado toast 3 times a week? Maybe, maybe not, but despite the correct answer, every time you ask Alexa to refill your shopping cart Amazon takes that into account and will generate ads accordingly. The question is, can carriers learn from this and mimic that recipe for success?
The answer is yes. More than 74% of respondents to FRISS’ Fraud Report say that adjusters at their company fight fraud based on gut feeling alone, rather than automated processes. However, these big tech companies use advanced analytics to know their customers. So why aren’t insurers doing the same?
Gut feeling and manual processes are not enough in 2023. Customers expect instant responses, and they will stay loyal to whoever can offer that. One way to increase customer satisfaction is through automating trust. Choose a fraud-fighting platform that will gather and analyze all data about a (potential) policyholder and flag the suspicious ones before they can even enter your book of business.
The Use of Artificial Intelligence
Over the past few years, insurance companies have been increasing their use of artificial intelligence to help them prevent fraud, and this trend is here to stay. The difference now is how advanced that technology is getting. Products like image and network analysis have taken off due to their unparalleled swaths of information and data.
Image analysis helps authenticate claims damage, checks for digital alterations, and searches if a claimant’s submitted photo was previously uploaded on the internet. On the other hand, network analysis checks if there are suspicious similarities in past claims, locations, items involved, of a claimant and creates a web of connections.
These, and similar solutions, make possible straight-through processing and faster payout at claims. In 2023, the speed at which claims are paid will be one of the top differentiators for insurance companies.
The amount of data and variety of data sources insurers gather today is astonishing. The development of new techniques such as data mining, deep learning, and advanced statistical models made it possible to forecast behavior with greater accuracy. However, many insurers don’t invest in resources to tackle this data and therefore miss the opportunity to gain deeper insights.
In 2023, predictive analytics will be crucial for insurance companies who want to minimize the fraud impact. Predictive modeling can, for instance, model a customer’s behavior based on internal and external data and compare it with fraudulent activities. The results are instant, decisions are made faster and customers are left satisfied with the speed of service.
Create a Fraud Prevention Culture
Relying only on government anti-fraud plans and guidelines of industry associations is not enough anymore to foster internal fraud prevention culture. While our research found that 72% of insurers say they do have an anti-fraud culture, only a third have a zero-tolerance policy against it. This leaves room for the “if it’s gray, you pay” uncertainty among adjusters.
A fraud prevention culture requires structured communication between departments, senior management involvement, fraud awareness training, and aligned performance standards for staff.
Sharing Insurance Fraud Information
Insurance companies can benefit by joining forces and sharing information through fraud pools. It’s one of the best ways to track, fight and control organized fraud. This would help insurers learn about the latest fraud schemes before they fall a victim to one.
Access to international fraud pools would make it more difficult for fraudsters to hop from one country to another or from one insurer to another and commit the same scam. When carriers share data on fraudulent claimants, repair shops, medical providers, images, insured assets, etc., their chances of stopping fraudsters in the early stages of the policy lifecycle increase exponentially. Those insurers that capitalize on cooperation and information sharing in 2023 will stay ahead of the game.