Anti-fraud technology has become an integral component in insurers' fraud-fighting arsenal. In fact, when coupled with collaboration amongst SIU, claims, law enforcement, and other entities, such technology may represent the most powerful weapon in combatting organized criminal empires in particular.

Yet, even though insurance carriers are eager to both adopt and utilize anti-fraud technology in increasingly creative and sophisticated ways, they face major challenges impeding successful deployment. To delve deeper into these obstacles and the current relationships between carrier and technology, the Coalition Against Insurance Fraud with the help of SAS conducted a study of 74 insurers.

Overall, the results of the inaugural study have been encouraging, including the fact that close to 90 percent of the insurers surveyed are at least using basic analytic tools such as automated red flags, claims scoring, and link analysis. This, however, means that 10 percent of study participants are not incorporating technology in their fraud programs.

When relaying the underlying metrics and key survey findings to attendees at this week's 27^th annual IASIU conference in Palm Desert, Calif., CAIF Executive Director Dennis Jay said that while insurers still have a long way to go, their progress should not be diminished and does bode well for future progress.

“Anti-fraud technology is maturing rapidly, and many insurers have come a long way in the last few years. Although the study suggests that less than half of 74 insurers are employing predictive modeling, text mining, geographic data mapping and other advanced analytics*, we must keep in mind that we are in an era of tremendous pressure on funding. The fact that the majority of survey participants say they plan to either increase investment in these technologies in 2013 or at least maintain current levels is positive news.”

*See page 2 for chart.

Even so, only about 14 percent of participating insurers report using any automated tools to detect underwriting or point-of-sale fraud. More than half of the insurers have been using anti-fraud technology for more than five years, and about one in five is relatively new to the tech arena, having deployed such analytics in just the last two years.

Common Obstacles

When asked to speak to deployment challenges, insurers cited the lack of IT resources and the difficulty in calculating cost-benefit analysis as two of the biggest obstacles. But even with such obstacles, most insurers interviewed for the study expressed satisfaction with their systems and many plan to upgrade in the near future. Nearly a third expect technology budgets to increase next year. Top new technologies on their shopping lists include predictive modeling and text mining capabilities.

Insurers said their analytical systems are giving them better quality referrals of suspect claims, and in many cases, are helping to detect organized fraud much more quickly than traditional investigative techniques. Their systems also are detecting potential fraud that otherwise likely would go undetected, according to survey results. Areas where technology is having the greatest impact include medical provider fraud, personal auto comprehensive/collision coverage and no-fault claims, respondents said

“When we ask insurers about the benefits of using anti-fraud technology, they report already experiencing higher quality referrals, meaning fewer 'false positives,” Jay adds. “Meanwhile, the types of cases that should be referred to the SIU are going there.”

In underscoring the need to bring more sophisticated forms of anti-fraud technology to the forefront, Jay also stressed the vital role claims professionals' expertise will continue to play in softening the blow of insurance fraud on the industry and the public.

“Moving forward, we will still need the intuition and experience of claims handlers,” he said. “There is an additional need for more (street) investigators overall, as well.”

The CAIF will be using these findings as baseline data from which to craft and compare future surveys. Ideally, Jay hopes the organization will be able to carry out a survey every 2 years. Additionally, a newly created committee will be involved in future planning.

The Research Committee Members are:

John Kloc, Sentry, chair
Heidi Krumenauer, American Family
David Rioux
Frank Llende, Allstate
Jeff Moore, Progressive
Dr. James Brown, Univ of Wisconsin
Steve Rutzebeck, GEICO
Swapn Rahman, Liberty Mutual
Sean Zavale, Farmers

Special Reports /

CAIF: Tech Propels Anti-Fraud Strategies, But Challenges Persist

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