RiskTech Forum

Insurance Fraud

Posted: 18 October 2012  |  Author: Sharon Davis

The insurance industry has long struggled with the problem of fraud, which is widely seen as justifiable by customers, while insurance firms themselves have been willing to accept a level of fraud in the absence of the tools needed to tackle it. In the current economic and technological environment, this is no longer a satisfactory approach. The drivers of insurance fraud are pressure, opportunity, and rationalization. The recession has strengthened all of these factors, while the internet has also made fraud easier to commit, both by opportunistic customers and organized fraud rings.

While fraud rings are becoming smarter and more sophisticated, anti-fraud technology is also keeping pace and vendors are offering new methods of detecting and preventing fraud. Until recently, anti-fraud technology systems were based on static rules and flag-based systems that were designed primarily to catch relatively straightforward, opportunistic frauds by customers. However, to catch professional, cross-channel fraud rings, a dynamic, real-time system incorporating data-sharing capabilities is required.

While many firms are still using static systems that rely more on rule-based detection rather than dynamic prevention, the industry is beginning to invest in real-time integrated analytics solutions that can predict and prevent fraud. Firms also need to employ systems that draw data from across different channels of the business and can access third-party data pools set up by the industry. These systems not only make it easier for firms to tackle more sophisticated frauds, they also improve the efficiency of tackling simpler fraud, allowing anti-fraud teams to spend more time investigating more complex cases.