A fraud expert shares the evidence-driven ways that insurance professionals can prevent fraudsters from obtaining illegitimate policies and deceitful payouts.
The bombshell news of the “Wicked Tuna” TV star defrauding the U.S. government for $44,000 worth of disability benefits should serve as a critical lesson: insurance fraud is prevalent, and can come from almost anywhere.
In fact, the Insurance Information Institute approximates that the property and casualty industry loses $30 billion to fraud every year, and financial analysts at FICO estimate that anywhere between 10% and 15% of clients who receive an insurance payout have some kind of fraudulent information contained in their policies.
This problem has only been exacerbated by the proliferation of direct sales, which eliminates the safeguards of savvy insurance brokers.
“With direct sales, there’s no face-to-face connection with agents or brokers, said Scott Horwitz, director, FICO. “Also, because insurers are in this competitive environment trying to write policies more quickly to decrease their expenses, there’s a greater opportunity for applications to go through that normally wouldn’t.”
As a result, Horwitz has several suggestions to crack down on fraud.
“Insurers can certainly use publicly available data out there in an automated way and check that it matches up with the application,” he said.
In addition to ensuring that names and properties align with those on the application, he advises brokers to consult databases that contain information about who has filed claims in the past or committed fraud previously.
In addition, potential hoaxers are often wary of digital forms capable of “auto-completing” their personal information.
“These can check databases and pre-fill information to show that the insurance company already has that information about someone,” he said. “If I’m trying to commit fraud and see that an insurer has already accessed my verified information, that might cause me to think twice about the crime.”
In addition, similar strategies can be implemented on the claims side. Horwitz suggests the following tips to combat fraudulent insurance claims:
- Identifying patterns in the data to determine which types of fraud have been committed historically, and building profiles that look for those kinds of clients
- Monitoring claims with an eye toward any outliers or aberrant activity
- Linking claimants to see if secondary or supplemental ones, such as auxiliary passengers involved in a motor vehicle accident, have a history themselves
“Being able to link data across claims becomes very valuable and a way to not just analyze one claim but a network of them, which might indicate organized fraud or someone who is taking advantage of the system by placing themselves in multiple claims,” he said.
Canada maintains several databases that share claims from multiple insurers for the purposes of identifying fraudulent patterns. In addition, many government agencies can provide public records and criminal “black lists” which can be of assistance as well.
Typically, these techniques yield twice as many fraudulent cases as traditional methods, and insurers can assist brokers in making them a regular habit.
“When brokers start to gather information for a policy, they can use carrier capabilities to start raising a red flag or identifying policies that may or may not be legitimate,” he said. “Automated techniques can be used to drive messages that allow them to focus on certain areas that are most useful to them.”
