Insurance fraud fighting and risk assessment best practices series. What we’ve learned from over 150 implementations at P&C insurance carriers globally.
Can you imagine a world without digital tools? Over past few decades, especially the past few years, digitization has completely changed our lives. Every company is seeking to make operations more efficient.
With digitization we entered a whole new era with nearly unlimited possibilities. All types of relevant information can be verified in real-time. For insurers this means they can check immediately if an applicant and an owner are the same person. Or if the claim concerns a “regular driver.” And how the driver is connected to the policyholder. Outcomes of such screenings have the potential to directly impact company performance.
As everyone speaks about digitalization, you might expect every company is using, or at least discovering, the possibilities of digitization in their daily operation. However, this is rarely the case for insurance risk assessment and the fight against fraud. Many companies are still reliant upon their staff and do not have an automated solution in place. In a recent survey on the state of digital transformation in insurance, 67% of the respondents state that their company fights fraud based on the gut feeling of their claim adjusters. That means assessing risk in order to fight fraud is still a time-consuming and error-prone process. Respondents who are using an automated solution state they are way more effective at fraud investigations by directly recognizing claims that need further attention or require active follow-up.
AI to support operations
The current “big thing” in technology and digitization is obviously artificial intelligence. Virtually every carrier agrees that AI can create more efficient operations. If applied properly, AI helps make better, automated decisions everywhere, at every moment of the day. It supports customer service, underwriting, claims, pricing decisions, special investigations and more.
The human side of the story
Besides technology, people can also have a bigger impact to create a more efficient operation. Insurers indicate that claims and underwriting departments need to be more engaged, as only a third of carriers have a zero-tolerance policy against fraud. In short, success is not only a matter of having digital tools. It’s also a matter of choice.
The Allianz example
Allianz Benelux is extremely active in fraud prevention. Under their “zero tolerance” motto, fraud specialists can be found throughout the organization. At the corporate level, the policy on fraud is partially coordinated by the Legal & Anti-Fraud department.
Steady expansion of the Special Cases Team highlighted a pressing need for a uniform means to record data. Proper data recording is the first step in effectively investigating suspected fraud. Jos Vonk, Central Senior Fraud Coordinator in the Legal & Anti-Fraud department, explains: “We received files that had been subjected to detailed investigation, but which had not been logged in our central file and incident registration system. Determining what had and had not been done was a complex task for our department, and a complete waste of time. Furthermore, the risk of errors was higher due to the lack of a standardized recording method.”
Allianz partnered with FRISS to help streamline their process. The next step was to simplify the procedure for transferring suspected fraud case files to both the Special Cases Team (Claims) and the Anti-Fraud Department (Underwriting). Depending on its findings, the Special Cases Team would provide advice regarding the approach to be used.
FRISS Investigations at SIU provides a centralized place to store all case/investigation information and share information among teams. This procedure saves Allianz a great deal of time. “Reducing operational costs is high on our wish list and FRISS Investigations at SIU allows us all to work more efficiently,” Vonk said of the product. “We not only achieve savings by preventing and resolving fraud, but also by optimizing fraud investigations and subsequent prosecution.”
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.