Insurance fraud fighting and risk assessment best practices series. What we’ve learned from over 150 implementations at P&C insurance carriers globally.
“We are currently working on a core system replacement, but it’s taking a long time.”
You’re not the only one. 55% of your colleagues in the sector are also feeling your pain. It’s a fundamental process that can often take several years, but this does not have to lead to the postponement of the introduction of risk analysis and fraud detection methods. In fact, these work well outside the core system, usually as a SaaS solution. You do not have to wait at all. You can immediately start working on improved customer experience and higher returns.
Looking at actionable risk assessment and fraud analytics, a seamless integration to the core system helps to:
- Realize STP at underwriting
- Enable fast-track touchless claims
- Decrease cycle time
- Increase customer satisfaction
And provides key business capabilities such as:
- Predictive Underwriting Scoring – Use of underwriting scores based on real-time, individual analysis of internal and/or external data for each risk.
- Machine Learning/AI for Underwriting and Claims – Refining predictive models and guidelines using AI to review data patterns and outcomes.
- Predictive Claims Fraud Scoring – Analytics using internal and/or third-party data to identify potentially fraudulent claims proactively.
As the organization is changing anyway, why not use the opportunity to immediately start benefiting from automating the fraud detection and risk assessment processes? You can leverage historical data from the legacy system and at the same time build on new insights using predictive models and AI in the new situation. And the good news is, a fraud fighting project requires very minimal IT resources.
Realize a fully digital experience
By integrating fraud and risk scoring, it simply becomes an automated part of the daily underwriting and claims routines. Through AI, expert rules, profiles, predictive models, text mining and link analysis all claims receive an accurate and consistent estimation of fraud and risk. Integration of internal and external data sources enhances the detection of possible fraud and provides a holistic view of policy requests.
A fully digital and touchless claims process can be established without losing the necessary controls. Claims adjusters will be able to handle and adjudicate most claims based on information accessible through the core system.
Important when talking about the use of AI is to make the outcome as understandable as possible. For example, as a claim adjuster you need to be able to explain why a certain claim has a high score. Someone without any technical knowledge should be able to go into the product and explain what happened and why it is the way it is. In underwriting, especially for commercial lines, you want to able to explain why a request got certain conditions.
A big advantage for the customer is that when you are an honest client with low risk you will go in the fast lane, be accepted for your policy request within seconds, or have your claim settled immediately. On the other hand, those trying to commit fraud will be treated accordingly.
Since all processes (claims management, policy management, contact customer management, legal and accounting accounting) are interconnected through the core system, integration is of utmost important.
The UNIQA Insurance Group example
UNIQA Group is one of the leading insurance groups in Austria and Central and Eastern Europe (CEE). With a market share of 22%, UNIQA is the second largest insurance carrier in Austria. UNIQA is also one of the largest insurance groups in the CEE region, with presence in 15 countries. The company is therefore focusing its growth around digitalization to significantly improve the customer experience.
Besides enhancement of anti-fraud activities, it was crucial to improve the claim handling process and to stop payments in fraudulent claims. Project leader UNIQA Group: “UNIQA was about to implement a new core system for all lines of business. Seamless integration of an automated fraud detection software within the core system was therefore a strong requirement.”
To setup a single, standard process for UNIQA, with central monitoring and steering from its headquarters in Austria, the FRISS software is now implemented group-wide. Not only does this quickly generate savings, it also improves the claim handling process. Improving the customer experience was just as important for UNIQA as fighting fraudulent claims. With FRISS, UNIQA can serve its honest clients even better. Thanks to seamless integration with their core system, UNIQA is now able to put claims from sincere customers on track for faster claim handling and payment.
Setting the scene
No insurance company is immune to fraud. As much as the industry might feel prepared, fraudsters are smart and always look for the weak spot. Fraudsters use everything they have in their power to get money from insurers and they find ways to avoid getting caught. And these fraudsters are insurer-agnostic, so no one is safe. Insurance fraud is a global problem. On average, 10% of incurred losses are related to fraud. Fraud is also a growing problem, contributing to 10 to 15 percent of total claims costs. The total cost of P&C insurance fraud is more than US$80 billion per year in the US alone, according to the Coalition Against Insurance Fraud. That means insurance fraud costs the average US family between $400 and $700 per year in the form of increased premiums.
By actively fighting fraud we can improve these ratios and the customer experience at the same time. It’s time to take our anti-fraud efforts to a higher level.
The good news here is that the battle against fraud is at least being taken more seriously. Fraud affects the entire industry, and fighting it pays off. US insurers say that fraud has climbed over 60% over the last three years. Meanwhile, the total savings of proven fraud cases exceeded $116 million. Insurers are seeing an increase in fraudulent cases and believe awareness and cooperation between departments is key to stopping this costly problem. The insurance industry is working hard to improve on fraud detection and prevention. It is definitely a topic on the agenda and not underestimated. In this case, everything starts with awareness.