Let’s face the facts. In 2017 loss ratios in the US were 73%. On average, 10% of the incurred losses were related to insurance fraud, resulting in losses of $34 billion per year. By actively fighting fraud, we can improve these ratios and our customers’ experience. It’s time to take anti-fraud efforts to the next level.
Things don’t change overnight, but an effective industry-wide fraud approach will result in healthy portfolios for insurers and fair insurance premiums for customers. At FRISS, we conducted the Insurance Fraud Survey 2019 to gain a better understanding of the current market state, the challenges insurers must overcome and the maturity level of the industry regarding insurance fraud. Here are the 5 top take-aways.
1. Automate fraud fighting to boost results
Companies like Google, Spotify and Uber all deliver personalized products or services. Data is the engine of it all. The more you know, the better you can serve your customers. This also holds true for the insurance industry. Knowing your customer is very important, and with lots of data, insurers now know them even better. You’d think in today’s fast digital age, fighting fraud would be an automated task, but that’s not the case. 67% of the survey respondents say their company fights fraud based on the gut feeling of their adjusters rather than using automated processes.
2. Leverage Artificial Intelligence
Intelligent software is capable of processing information quickly, learning independently, drawing smart conclusions, and making recommendations. Just like a human, but then smarter and more efficient. We’re talking about artificial intelligence (AI). The huge quantity of data and the impressive computational power means these analyses are carried out at lightning speed and with great accuracy. For instance, Artificial Intelligence can be used to analyze images while simultaneously checking for fraud. There are dozens of AI types currently available and under development. Insurance carriers can use these technologies to improve and streamline their risk analysis and fraud identification processes.
3. It’s all about data
Data scientists at carriers deal with huge amounts of information: internal insurance data from files or coworkers, data from various systems and data from external sources. Information on the insured persons and assets, the claims, and detected fraud helps in making well-founded judgements about risks, trends, and the value of policies and portfolios. In an ideal world information would be captured completely in figures and data fields that make sense. But how reliable is all this information? There are substantial pitfalls between the ideal world and reality: both in the systems and with us humans. Differences in culture, accuracy and consistency make it difficult to compare the contents of multiple administrative systems. And to top it off, the human factor can have both a positive and a negative influence on data quality.
4. Create a Fraud Fighting Culture
Regulators in many countries created anti-fraud plans and fraud awareness campaigns. Several industry associations have also issued guidelines and proposed preventive measures to help insurers and their customers. 72% of insurers say they have a fraud-fighting culture. However, only a third have a zero-tolerance policy against fraud. A fraud fighting culture requires structured communication between departments, involvement of senior management, fraud awareness trainings, and aligned performance standards for staff. In general, when it comes to key performance indicators, adjusters are measured on customer satisfaction and how quickly they handle claims. If you also measure how well they detect fraud, additional questions in the process with the customer are needed. If carriers align those, they can achieve a lot.
5. Sharing is caring
Insurance companies would all benefit by joining forces and sharing information through fraud pools. It’s the only way to track, fight and control organized fraud. This would help insurers learn about the
latest fraud schemes and stay ahead of the game. Fraudsters are always looking for the weak spot. Access to international fraud pools would prevent fraudsters from going from one country to another and from one insurer to another. If insurers would share data on fraudulent claims, repair shops, medical providers, images, and insured assets, this would increase their chances of stopping fraudsters early on. In the survey, 33% of insurers identified cooperation as a challenge.
Work together to make insurance more honest
Fighting fraud needs to be in a carrier’s DNA. International anti-fraud plans and regulations help in paving the path for honest insurance, across carriers and borders. This will be important since fraudsters don’t stop their efforts at just one insurance company. While industry awareness is growing, there are still many opportunities for improvement.
Want to learn more? Download the full Insurance Fraud Report 2019 here.
