Insurers tend to view fraudulent claims as a fact of life, and most industry professionals believe 10% of all claims contain an element of fraud. But insurers don’t have to accept that; Automatic Fraud Detection improves the identification of fraud and saves money, as well as informing underwriting strategy and reducing customer churn.
We look at 10 specific ways the platform can help.
Fraud is expensive
In 2019, UK insurers are estimated to have paid out £1.2 billion on fraudulent insurance claims. What’s more, sophisticated fraud detection systems often involve a large upfront investment of both money and time.
Using a combination of artificial intelligence (AI) and a powerful decisions business rule, Automatic Fraud Detection enables faster, more accurate identification of fraud. This in turn reduces losses, ultimately leading to lower premiums for the customer.
Analysing suspicious claims takes time
Working manually on each investigation of a suspicious claim – as a high proportion of smaller insurers still do – is a slow and painstaking process. Automatic Fraud Detection takes much of the burden away from individual analysts and significantly reduces the overall time taken to analyse each claim.
Manual analysis is subjective
Any system that relies on individuals analysing and making decisions on potentially fraudulent claims has the potential to be flawed as a result of lack of expertise, gaps in knowledge, or simply human error. Automatic Fraud Detection gives insurers the power to analyse claims more accurately, more systematically and less subjectively than any manual analysis can achieve.
Genuine claims get caught up in fraud analysis procedures
Traditional manual analysis of claims is a time-consuming process that inevitably involves checking many claims that are perfectly legitimate, and thus slowing up payment.
Because Automatic Fraud Detection makes it easier to identify fraudulent claims, it also makes it possible to route low-complexity claims for prompt payment. By giving customers a good experience at a critical time, this helps to keep them satisfied with their insurer and contributes to reducing churn.
The importance of patterns
One of the key benefits of an AI-powered solution is its ability to compare vast datasets and identify patterns that would not be immediately obvious to human analysts. For example, the platform’s geolocation functionality highlights unusual geographic clusters of fraud, increasing the visibility of organised crime networks and helping to inform fraud prevention and underwriting strategies.
Successful frauds are repeated
Once a fraudulent claim has been paid, the likelihood of the fraudster repeating the exercise increases, potentially costing the insurer even more money.
However, our analytics platform recognises patterns in historical claims that have proved to be fraudulent and compares them with new claims, reducing the chances of any single fraudster succeeding more than once. In this way, the platform is continually improving its fraud detection capability.
Insurers need to overview
The manual nature of the claims analysis process typically leads to a lack of visibility and traceability. With Automatic Fraud Detection, all the analysis is carried out on a single platform, with interactive dashboards to increase the visibility of potential fraud cases.
Analysts don't always have access to all the data they need
When it comes to detecting fraudulent claims, it helps to have as much information as possible, but it’s not always straightforward to get access to the relevant data.
One of the benefits of Automatic Fraud Detection is that its Discovery Tool gives access to relevant, open-source and legally available external data feeds, such as social media channels and data on individuals’ financial backgrounds, which can help to give a more complete picture of the claim.
Learning from the past
As the old saying goes, prevention is better than cure. Automatic Fraud Detection uses machine learning techniques to learn from the past and accurately predict future trends, providing insights and intelligence that can be used to inform underwriting strategy and help avoid fraud in the future.
Detection is only half the story
Once a fraudulent claim has been detected, the issue changes to one of investigation. Because Automatic Fraud Detection is a Charles Taylor solution, it can be used in conjunction with our Specialist Investigation Services offering – a multi-sector investigations division that is highly experienced in handling all kinds of insurance fraud – to provide an end-to-end solution to fraud prevention, detection and investigation.