According to a survey by Gartner, the rate of insurance fraud is rising as a result of COVID-19. Types of fraud have evolved and the Coalition Against Insurance Fraud estimates that fraud now costs the U.S. insurance industry $80 billion in losses across all lines of business annually. This problem is worsening now as a result of the pandemic. As digitization facilitates the use of online sales, straight-through processing (STP), and customer self-service, unfamiliar risks will emerge as fraudsters find new ways to work the system.
This makes it more imperative than ever that insurers take an aggressive approach when looking at fraud prevention and management. One of the important measures carriers have to take into consideration is assessing the entire policy life cycle from issuance to claims processing, in order to identify risks. This will create opportunities for real-time fraud analytics to assist in loss prevention. Fortunately, there’s a number of initiatives that can be utilized today. Here are Gartner’s top recommendations:
1. Extend Fraud Management Beyond Claims to Underwriting to Support Holistic Digital Business Initiatives
Many insurers are shy to adopt this practice because “all business is good business, if priced accurately.” This would be a large paradigm shift for the industry — a shift that some companies are not ready for. It’s however critical that insurance CIOs examine and identify ways to prevent fraud across the entire policy life cycle.
2. Augment Internal Data with New Sources to Increase the Accuracy of Fraud Models
Companies have relied on contributory databases in the past. However, they must expand their data source usage to access the precision needed to take advantage of machine learning techniques that will be deployed in the future. To help optimize the . On top of that, carriers should begin to look at enhanced and more sophisticated detection. This not only can augment the results of the existing data they’re using, but also would give carriers an advantage when identifying the ever-changing schemes of fraudsters.
3. Implement Modern Fraud Solutions That Deploy Advanced Analytics, Machine Learning, and Enhanced Third-Party Data Integrations
The future of fraud detection lies in the use of advanced technologies to support real-time, large-volume, and highly precise modeling for claims and underwriting fraud. A hybrid approach of human expertise and computer-assisted modeling will be essential in preventing losses. This will reduce the costs of claims handling by removing unnecessary steps, such as adjudicating claims likely to be fraudulent, and by helping identify fraud rings using advanced machine learning to discover suspicious behavioral trends in the data.
Eventually, these recommendations will also help support new claims initiatives, such as no-touch claims processing and automatic approval for new policies, when used in combination with other algorithms, like customer pricing and claims analytics.
If you want to learn more, download the full Gartner study at: https://www.gartner.com/document/4000303
