Insurance fraud fighting and risk assessment best practices series. What we’ve learned from over 150 implementations at P&C insurance carriers globally.
Digitalization is a key priority for insurance companies. Technology is rapidly changing the insurance landscape. One of the main buzzwords is AI. Although AI is seen as very promising, only 37% of insurers say they are currently investing in AI. Of these insurers, 68% are using AI to enhance customer service, 52% are leveraging AI to reduce costs, and 50% are using AI for automated fraud detection, as well as straight-through processing (STP) for claims and underwriting.
When talking about the IT perspective of implementing a solution to automate risk assessment or detect fraud, companies must consider:
- Integration with different technologies and platforms
- Implementation time
- Expertise needed
- How future-proof the solution is
These elements all tie together in order for a project to be successful.
A technology project does not end with a successful implementation. That product might do a good job solving the challenges you face today, but what about tomorrow? Next year? The year after that? As the world around you changes, the product needs to change with it. This is especially true for insurance fraud. New fraud schemes develop quickly, making it hard for insurers to stay ahead of the fraud game. Think of the launch of new insurance products, product innovations, market developments, changing processes (straight-through-processing), changing regulatory requirements or even simpler: enhanced insights. This can all influence the results of your implementation.
These challenges call for a journey of continuous improvement to stay ahead in dynamic times and to sustain for the future, ensuring your solution is in optimal condition at all times.
The Anadolu Sigorta example
Anadolu Sigorta is part of İsbank, 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. Anadolu Sigorta has a clear vision when it comes to IT projects. Thanks to this, they managed to realize their fraud analytics project within time and budget, delivering the results they were looking for: a contribution to their digital transformation and improvement of the customer experience.
According to Erdem Karabostan, Manager of the Project and Change Management Department at Anadolu Sigorta, integration of the fraud analytics solution is of utmost important because, since all the processes like claims management, policy management, contact customer management, legal and accounting are all interconnected.
Karabostan: “Digital transformation is a whole process. Fraud detection is a very specific process. That can be addressed in this journey of digital transformation because it is more about the data. Since its more about the data, there are a lot of future possibilities in this field about using AI. About the opportunities coming from the big data phenomenon. Also, in the future maybe internet of things. So, this is a good investment.”
The project was finished within only six months from kick-off to go-live. In that first year they already saved millions of dollars and had a huge ROI of 210%.
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.