Anti-fraud technology has become an integral component ininsurers' fraud-fighting arsenal. In fact, when coupled withcollaboration amongst SIU, claims, law enforcement, and otherentities, such technology may represent the most powerful weapon incombatting organized criminal empires in particular.

Yet, even though insurance carriers are eager to both adopt andutilize anti-fraud technology in increasingly creative andsophisticated ways, they face major challenges impeding successfuldeployment. To delve deeper into these obstacles and the currentrelationships between carrier and technology, the Coalition AgainstInsurance Fraud with the help of SAS conducted a study of 74insurers.

Overall, the results of the inaugural study have beenencouraging, including the fact that close to 90percent of the insurers surveyed are at least using basicanalytic tools such as automated red flags, claims scoring, andlink analysis. This, however, means that 10 percent of studyparticipants are not incorporating technology in their fraudprograms.

When relaying the underlying metrics and key survey findings toattendees at this week's 27^th annual IASIU conference inPalm Desert, Calif., CAIF Executive Director Dennis Jay said thatwhile insurers still have a long way to go, their progress shouldnot be diminished and does bode well for future progress.

“Anti-fraud technology is maturing rapidly, and many insurershave come a long way in the last few years. Although the studysuggests that less than half of 74 insurers are employingpredictive modeling, text mining, geographic data mapping and otheradvanced analytics*, we must keep in mind that we are in an era oftremendous pressure on funding. The fact that the majority ofsurvey participants say they plan to either increase investment inthese technologies in 2013 or at least maintain current levels ispositive news.”

*See page 2 for chart.

Even so, only about 14 percent of participating insurers reportusing any automated tools to detect underwriting or point-of-salefraud. More than half of the insurers have been using anti-fraudtechnology for more than five years, and about one in five isrelatively new to the tech arena, having deployed such analytics injust the last two years.

Common Obstacles

When asked to speak to deployment challenges, insurers cited thelack of IT resources and the difficulty in calculating cost-benefitanalysis as two of the biggest obstacles. But even with suchobstacles, most insurers interviewed for the study expressedsatisfaction with their systems and many plan to upgrade in thenear future. Nearly a third expect technology budgets to increasenext year. Top new technologies on their shopping lists includepredictive modeling and text mining capabilities.

Insurers said their analytical systems are giving them betterquality referrals of suspect claims, and in many cases, are helpingto detect organized fraud much more quickly than traditionalinvestigative techniques. Their systems also are detectingpotential fraud that otherwise likely would go undetected,according to survey results. Areas where technology is having thegreatest impact include medical provider fraud, personal autocomprehensive/collision coverage and no-fault claims, respondentssaid

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

In underscoring the need to bring more sophisticated forms ofanti-fraud technology to the forefront, Jay also stressed the vitalrole claims professionals' expertise will continue to play insoftening the blow of insurance fraud on the industry and thepublic.

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

The CAIF will be using these findings as baseline datafrom which to craft and compare future surveys. Ideally, Jayhopes the organization will be able to carry out a survey every 2years. Additionally, a newly created committee will beinvolved 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