Gian Luigi Chiesa is a data scientist at FRISS and sees how insurers are leaving a lot of data in the battle against insurance fraud unused. He explains how insurance companies can use predictive modeling to profit from their own data in recognizing risks earlier and preventing fraud, comparing insurance to the popular video streaming service Netflix.
“The explosion of data, in recent years, has opened an unprecedented opportunity to find new and deeper insights into complex problems.
Traditional methods such as business intelligence, simple statistical models and slice and dice were developed around 30 or 40 years ago. Many firms still only use these traditional methods, which do not give answers to much deeper questions on your data sets.
Preventing fraud with machine learning
Many modern tools are available nowadays, such as: machine learning, deep learning and network analysis. Those can be employed in your business with high performances.
One of the most powerful and influential companies in the entertainment industry already heavily capitalizes on such methods. And I’m talking about Netflix.
A couple of years ago, Netflix realized that it needed to solve the problem of having so much content that the user would just get lost. To deal with this, Netflix built very large-scale networks which connect users and shows. The power of this methodology speaks for itself.
The company estimates about 75% of viewer activity is driven by these recommendations. How does this concern the insurance world? Well, people are connected via their claims in a natural way. As Netflix connects users and shows, we can connect people and claims.
We can define subjects… which can be persons, companies, aliases, or objects… which can be vehicles, addresses, locations, and events… which can be entering a claim, having an accident or entering a policy.
It makes a lot of sense to build a network based on these relationships.
And in such networks, we can look for interesting patterns. Just like the Netflix network can profile a user as one who may like Fight Club, for example, our network can profile a person as a potential fraudster.
Those predicted profiles can greatly enhance the value of your portfolio. For example, by applying these methods at the gate, when people are requesting a policy, you can differentiate how you are going to deal with people based on their predicted profile.
100% straight-through processing
In the future the evolution of these tools can lead to a more honest insurance industry, with less room for fraud and potentially a 100% straight-through processing of claims and policy applications.
If you embrace those tools, you’ll be rewarded.”