Fraud continues to pose significant challenges for the life and health insurance sector in Canada, according to a recent survey conducted by Gen Re.
The findings highlight the impact of economic pressures and increasing digitization on the prevalence of both opportunistic and complex fraud schemes. The survey, which targeted 11 Canadian insurers offering life, health, and disability products, revealed key insights into fraud exposure, detection, investigation, and resolution strategies.
Gen Re said that its analysis underscores the evolving nature of fraud in the insurance industry, with particular emphasis on the importance of enhanced detection systems and robust risk management practices. The findings point to areas where the industry has implemented effective measures and where further investment is needed to address vulnerabilities.
The survey identified common types of fraud faced by insurers, including foreign death claims, material misrepresentation during the application process, fraudulent activities outside the policy contestable period, and concealment of gainful employment or higher functioning in disability claims.
Gen Re noted that these issues remain consistent challenges across the Canadian market, necessitating ongoing vigilance by insurers.
The study also highlighted the prevalence of fraud in accelerated underwriting processes, a feature used by all respondents. While 90% of insurers reported having controls in place to identify questionable applications, only 60% conduct post-issue audits, leaving a potential gap in fraud prevention efforts.
Gen Re found that all participating insurers have implemented basic fraud detection measures, such as anti-money laundering policies and special reviews for foreign death claims. However, only half of respondents have systems in place to detect identity fraud or accounts linked to fabricated identities.
This is particularly concerning given the rise in identity theft and synthetic identity schemes. The report emphasized the importance of comprehensive “Know Your Customer” processes to safeguard both insurers and policyholders.
Claims adjudication procedures rely heavily on manual methods to identify suspicious claims, with only 25% of insurers incorporating artificial intelligence or automation into their detection efforts. Gen Re attributed the reliance on manual processes to a lack of automated resources and insufficient staff training, which were identified as key factors increasing exposure to fraud.
According to Gen Re, two-thirds of the surveyed insurers have in-house fraud teams, and almost all use third-party services when necessary. While only one respondent plans to increase fraud staff headcount in the next year, 50% anticipate raising their overall fraud prevention budgets, with none planning budget cuts.
The report noted that surveillance and field investigations are commonly outsourced, but one-third of insurers do not use surveillance even for questionable claims. Gen Re recommended regular evaluation of third-party resources, emphasizing the need for clear service-level agreements, compliance monitoring, and quality checks to ensure effective fraud mitigation.
While most insurers compile annual fraud statistics, only 63% report these figures to regulatory bodies or industry groups, according to Gen Re. The lack of a central database for life and health insurance fraud in Canada complicates efforts to identify industry-wide trends and develop targeted strategies.
Gen Re highlighted the importance of detailed tracking and reporting as critical components of an effective fraud mitigation framework.
The survey also revealed that all insurers have whistleblowing hotlines and conduct regular internal fraud risk assessments. Gen Re noted these measures as essential for maintaining vigilance but encouraged further collaboration within the industry to establish unified reporting standards and improve access to reliable data.
Based on the survey findings, Gen Re encouraged Canadian insurers to enhance their fraud detection capabilities by investing in data analytics, social media monitoring, and document analysis platforms.
Maintaining an updated internal database of suspicious trends and exploring new vendor resources were also recommended as practical steps to strengthen fraud prevention strategies.
Gen Re concluded that while Canadian insurers have made progress in addressing fraud risks, opportunities remain to improve industry-wide collaboration and leverage technology to better manage evolving threats.
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