Pandemic accelerates digitalization

COVID-19 will have a lasting impact on insurance, in large part because the pandemic has accelerated digital processes. Our prior biennial survey, released in 2020, showed the shift to remote work and digital transactions increased workloads, reduced fraud inspections and resulted in more cases of suspected and proven fraud. While these trends are continuing, insurers also are better positioned to take advantage of digital tools to combat fraud. One change since the prior survey is an increase in the percentage of claims suspected as fraudulent. In 2020, insurance professionals suspected 18% of claims might contain fraud. In 2022, however, that suspicion rose to 20%.

The top changes COVID-19 forced on insurance organizations, according to respondents, included:
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• Focus more on digitalization
• Increased checks for suspected fraud
• Reduce costs
• Adjust pricing
• Leverage more data for risk profiling
• Rethink underwriting standards

Fraudsters remain creative

During 2021, fraudsters continued to perpetrate schemes against insurers. Some of the most common insurance claim schemes, according to survey respondents, were:
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• False injuries
• Nondisclosure of relevant information
• Staged accidents
• Multiple claims for same incident
• Malingering in workers comp claims

Some of the more unusual fraud schemes in 2021 included:
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• Roofers causing damage to support full roof replacement
• Identity theft to file unemployment claims
• Self-inflicted personal injuries
• Theft of a food truck that didn’t exist

Accidents unfortunately happen, but respondents found multiple cases of individuals intentionally harming themselves, such as cutting off fingers, to file insurance claims. In other cases, claimants alleged the coronavirus had contaminated their vehicles and demanded insurers pay for a full cleaning. Creativity and persistence in claims fraud is an ongoing problem for insurers. For 41% of survey respondents, keeping up with modern fraudster modus operandi was their greatest challenge in effective responding to fraud. Other fraud-response challenges included data protection and privacy, cited by 37%, and poor internal data quality, 37%.

Mixed approach to fraud detection

When it comes to detecting fraud, 100% of survey respondents have mechanisms in place to identify potentially fraudulent claims. But only 62% employ a fraud detection technology solution.

What are the top fraud detection tools among insurance organizations? Respondents listed a variety, including:

The least-used tools included:

Data crucial in fraud fighting

Having the right data in the right place, and in real time, is essential to improving fraud detection. With many Insurers utilizing digital processes for almost all of their operations, the ability to see real-time data identifying potential fraud is hugely beneficial across the policy lifecycle – from first-party policy requests, to underwriting, and of course as claims are reported.

The difficulty is harnessing timely data to respond quickly when fraud is detected. Our past biennial surveys indicate insurance professionals have struggled with inadequate data – either poor-quality internal data or limited access to external data sources.

The data points on which insurers rely most to identify fraud, according to the 2022 survey, are:

A surprising statistic from the current and prior surveys is a relatively high number of insurance organizations that do not use fraud metrics. 37% now said their organization could improve its fraud-fighting efforts by measuring fraud metrics. It’s hard to manage, let alone mitigate, fraud when organizations do not measure it. Among external data sources, the most popular types used for fraud detection were:

Challenges and benefits in fraud detection software

Survey respondents have differing views on the challenges and benefits of fraud detection software solutions. Top challenges in implementing fraud detection software include:

On the other hand, respondents also see significant benefits in fraud detection software, including: