The insurance industry should become more streetwise in its approach towards insurance fraud. Fraudsters are getting smarter and more organized in their attempts to evade the insurer’s radar. Digitization of the industry becomes a major threat, fraud at underwriting increases exponentially and for every 1.000 insured persons, 3 commit fraud.
In line with the increasing digitization, insurance applications and processes are becoming more automated. This makes it easier for fraudsters to digitally manipulate insurers by obtaining a false identity or address data. Already a number of insurance companies are using their own apps to file a new claim, with all information and even with images of the actual damage attached to. It’s just one example in which digital information becomes available for the insurance process. “Not all insurers are aware of how easy it is to manipulate images. By manipulating images, fraudsters can even fake complete claims or damages”, says Christian van Leeuwen (CTO, FRISS).
For every 1.000 insured persons, 3 commit fraud
Improved detection systems and processes make sure that insurance companies are more capable of detecting fraud. For every thousand insured persons, an average of three are caught for committing fraud concerning an insurance product. In 2015, almost 10% more fraud was detected and proved while 15% less investigations were conducted.
Prevention is better than cure
More proven fraud is found at underwriting, for instance when wrong information is provided or information is deliberately kept silent when applying for an insurance policy. The amount of proven fraud from investigations at underwriting lies around 50%, which is much higher than at claims (35%). Fraud prevention is in general more difficult to prove, but much more cost effective than detecting and proving fraud of unjustified claims that have been paid out. “Insurers are frequently underestimating the value of an extensive risk assessment at underwriting, which enables insurers to keep potential fraudsters out in the first place”, Van Leeuwen explains.
Fraudsters repeat the same trick
Research shows that when fraudsters commit fraud at one insurer, they usually repeat the same trick at an average of four other insurers. If and insurer is affected by a fraudsters, the chances are high other insurers are confronted with the same act. By gathering more and better data, patterns could be identified. This applies to both insurance risk in general but also patterns concerning insurance fraud. Van Leeuwen provides an example case in Malta to which FRISS has contributed. The case was detected by a group of insurers, when they figured that certain claims submitted by the same persons at several insurance companies. Court proceedings took place against 22 persons for allegations of their involvement in a massive case of insurance fraud. Exchange of vehicles, repeated claims with different insurance companies and carefully staged traffic accidents were among the complex methods employed by the people involved. Van Leeuwen clarifies: “The participating insurance companies in Malta are an example of how working together is more effective in combating fraud.”