The Insurance Innovators: Fraud & Claims event, hosted by Marketforce, offered me some useful insight on what’s to come for insurance fraud in the near future. The economic pressure created by the 9.9% dip in GDP output in the UK in 2020, caused by COVID-19 is continuing to create the circumstances for insurance fraud to rise. So how can we get ahead of this? Well, here are my 3 main takeaways that I believe will provide everyone some helpful tips in battling our inevitable fate.
1. Data and Trust
Data continues to be an issue for insurance industry from many perspectives, an issue disclosed by many carriers in our 2020 Fraud Report. Firstly, getting internal data aligned and accessible is a key pre-requisite to any project and is not always straightforward. Raising the quality of internal data is a key challenge insurers must address as they try to take advantage of the new opportunities quickly advancing technology affords them.
Often, third party data is used to improve the information an insurer has on their policyholder or proposer, and the UK market has been at the forefront of the adoption of third party data to learn more about their customers and collaboratively sharing data to prevent fraud. The panel discussed that the use of data in fraud detection must be used responsibly and proportionately and, in general, applauded the UK interpretation of the GDPR rules in this respect. However given the often negative perception insurers have in the eyes of the public, it is easy to lose the trust of the customer base. This trust is vital to take advantage of the advances in data science and in the improvements offered by AI. If your customer does not trust you with their data going in, how will they trust the outcomes from the machine?
With ever more opportunities to use new and varied data sources to enrich the understanding of the customer, to offer tailored products and improve pricing accuracy, gaining and maintaining the trust of our customers will be vital as Open Insurance advances. Like with Open Banking, there will need to be a value exchange for the customer to have reason to trust insurers with their valuable data, for insurers to take advantage of the opportunities created in an open insurance environment.
Insurers pay the vast majority of claims, but we only ever hear the negative stories. It’s fair to say the Business Interruption issues mean insurers won’t come out of the pandemic with their reputations bolstered. There is a lot of hard work ahead to burnish their image and remind the public that the overwhelming majority of interactions customers have with insurers, are positive.
2. Fraud Consequences
Following on from that thought, the panels discussed the need for a consequence for those committing insurance fraud. It was discussed that the industry in the UK does really well in collaboration and sharing data, funding the Insurance Fraud Enforcement department and industry wide sharing of data with the IFB.
Generally though, Insurance fraud is too often seen as a victimless crime and too many people find it morally acceptable. If they get into an accident and don’t come out with an injury, is there really a negative side to faking one for a little while? We have all seen the adverts on the television, asking “Have you had an accident?”. We all know that there are prosecutions and fraudsters are added to the Insurance Fraud Register. But application fraud was up 200% and claims fraud detection up 5% in 2019. The deterrents are there, but is enough being done to convince the public of the consequences?
Unfortunately, every policyholder has to pay £50 per policy to subsidise insurance fraud. If you are caught out in misrepresenting yourself or exaggerate a claim you go on the Insurance Fraud Register. insurance then becomes more difficult to obtain and significantly more expensive. These facts need to be more forcefully placed in the public domain, to ensure the insurance fraud becomes socially unacceptable and so the opportunists think twice when they are trying to rationalize the decision to try it on.
3. Hybrid Models
People in the industry speak non–stop about AI. But what we often glaze over is the implementation process. In the discussion about the future of AI, it was acknowledged that the machine can take a while to learn new fraud patterns. We don’t want to lose our human touch, either. We discussed the looming threat of opportunistic fraud on top of the ever-present organized fraud. But how do we get ahead of that now and make sure we don’t end up impaired by forced innovation?
The answer is uniting technology with people. At FRISS, we constantly stress the importance of software combined with customer feedback, and this event reinforced the relevance of that to me even further.
One quote that stood out to me especially was from Adele Sumner at RSA: “Put the fraudster’s hat on. What are they going to do to us next?” We need to think in the same manner that they would in order to discover dishonesty. We cannot fully convert to technology because we lose an important aspect of stopping crime, instinct. There’s nothing like human intuition. The combination of modern software and our brainpower means we’ll see industry growth, without losing our edge to optimise technological implementation.
Cheers to a Fraud Free Industry
I hope these takeaways will help to make positive changes in our industry. Marketforce’s event created a platform for important conversation and I’m happy to see our industry leaders focusing on such crucial topics. As we say at FRISS, insurance is a beautiful thing, and if you’d like to learn more about the steps we’re taking to make honest insurance a reality, please reach out to me with any questions you have. We’re always delighted to talk about stopping fraud! And in the meantime, have a look at our eBook that explains how you can create a value-optimized portfolio!