Insurers are obviously super motivated to reduce instances of fraud that are draining their businesses, but existing obstacles will make success difficult to achieve.
- Insurers worry that serious spending on fraud will necessarily drive up premiums, which will alienate their cost-conscious customer base.
- They are also concerned that this increased spending may not yield significantly improved results. It’s still difficult for many insurers to distinguish between actual fraud and anomalies/false positives.
- Multiple legacy systems and a lack of system integration make it nearly impossible for many insurers to harness the latest fraud-fighting technologies, severely hampering the chances for success. It also makes data integration difficult.
“…insurers are concerned about their ability to integrate data into their systems and poor data quality. One can expect that, with the growing use of technology, this, too, will likely become less of a concern. Of course, insurance companies also are sensitive to consumers’ privacy concerns raised by the use of anti-fraud technology and have to ensure that their own data is safe from hackers and other potential security problems,” according to the New York Law Journal.
…But Insurers Are Motivated to Act
Despite the formidable obstacles, insurers are motivated to combat the fraud problem. They don’t have a choice, because the consequences of inaction are too severe. For example, American insurers can be heavily fined by the U.S. Department of Treasury’s Office of Foreign Assets Control (“OFAC”) if they are duped into insuring people (health and P&C policies) who have been placed on the “specially designated nationals and blocked persons” list.
Anne Rawland Gabriel states in Digital Insurance that insurers are enthusiastic about the benefits of fraud technology, with over 40 percent adding to their 2019 tech budgets and only two percent shrinking those budgets. Two-thirds expect to acquire claims fraud detection technologies, with over 30 percent investing in underwriting solutions.
Her article, which is based on The State of Insurance Fraud Technology survey of 84 carriers by the Coalition Against Insurance Fraud and SAS, highlights the areas where insurers plan to spend new money:
- Predictive modeling = 64 percent, vs. 19 percent in 2016
- Social network analysis = 43 percent, vs. 16 percent two years ago
- Artificial intelligence (AI) = 20 percent of insurers are planning purchases
These are all excellent, albeit related, approaches. Sapiens’ NEW Infographic, Facts on Fighting Fraud for Insurers, offers some interesting statistics and strategies.