Insurance fraud is rife in the industry today, right from the point of sale, through to filing a claim, although there is no definitive dollar amount of loss each year. As fraud results in a loss of earnings for insurers, and increased premiums for customers, detecting fraudulent claims has become a number one priority for insurers through modern technology and analytics.
Before beginning to analyze data, the quality of data is of particular concern and has created challenges for insurers when implementing anti-fraud technology. When a policy is taken out, proper checks must be done to assess the person applying and to ensure all information is correct at the time of inception. All policy information supplied should be recorded in a uniform manner to ensure it is clean and can be effectively analyzed later on.
Using historical information in the database, along with third-party data, insurers can identify trends, patterns, particular individuals or businesses making duplicate claims, and highlight other red flags that may indicate fraudulent activity. In fact, a recent survey showed that traditional automated red flags/business rules are the number one defense used by insurers to detect fraud.
As well as using internal and third-party data, other sources of information include industry fraud watch lists, public records, unstructured data, social media data, and data from connected devices. Integrating these data sources is easier when data is clean and of good quality.
Anti-fraud technology enables insurers to properly analyze quality data. As well as using business rules to identify potentially fraudulent claims, insurers are using a number of other tools, including predictive modeling, exception reporting, text mining, link analysis, data mapping, and case management.
The main challenge insurers face when implementing anti-fraud technology is limited IT resources. As it is difficult to quantify the dollar amount lost through fraud, a number of businesses find it hard to allocate necessary resources. As systems become more advanced, calculating ROI should become less difficult, and this will become less of a challenge.
Traditionally, insurance fraud was associated with auto and property claims, but today, fraud schemes have shifted to include bodily injuries, false claims, and corrupt medical providers. Disability and life insurers need to remain vigilant to prevent fraud, and remain competitively priced in the market.
To consider anti-fraud technology you must first ensure your data is fully integrated. To get started today view the full range of ClaimVantage products.