The Importance of a Fraud-Fighting Culture at Insurers

Insurance fraud fighting and risk assessment best practices series. What we’ve learned from over 200 implementations at P&C insurance carriers globally. A fraud-fighting culture is more than just an automated detection system. It’s the people that work with it who are important. It’s also the organization around it. 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. According to Marty Ellingsworth, Senior Analyst at Celent, fighting fraud is not a strategic competitive advantage. It’s the right thing to do.

Structured Communication

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. Apparently, that seems to clash with the more service-oriented KPIs. If carriers align these, they can achieve a lot.

Risk and fraud awareness must become embedded in the DNA of the company: from underwriting to legal & compliance, from claims to product development & sales. Naturally this includes the top management. Without the involvement and inspiration of senior executives, who must weigh-up interests responsibly, every change is a dead end. With a modern data system and collaborative culture, a balanced insurance portfolio and having a good insight into the risks carried can be achieved. This will lead to better products, satisfied customers and better operating results.

The Anadolu Sigorta example.

Anadolu Sigorta is one of the biggest Turkish private banks with approximately 1,360 branches. Anadolu Sigorta is number one in Turkish casco insurance, with 14% market share. Thanks to their fraud-fighting culture, Anadolu Sigorta managed to realize a 5 million euro saving on fraud, within only 12 months of time. How did they manage to do that? Head of the Claims Management Department at Anadolu Sigorta: “The most critical factor is the support of the top management and the way they look at this subject. Our top management supported us during the project and after the project. This was very important for the success. When it comes to the project phase I think it’s important to know the importance of data. We are using claims databases, customer databases and underwriting databases of our company data, and we are supporting this with the industry-wide data. I also think it’s critical to have a team dedicated to fraud. This team should be a talented team and have a background that fits the job.” Watch the vlog Success Factors for Fighting Insurance Fraud by Emin Ayik, Head of Claims Management at Anadolu Sigorta.

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.