More and more insurers are turning to software-as-a-service(SaaS) providers for low cost, easy-to-implement technologysolutions. New solutions in the cloud offer insurers a remarkablyfast and cost effective way to implement fraud analytics technologywithout burdening overwhelmed IT resources or introducing bigcapital expenditures.

What is "the cloud" anyway?

Lots of people talk about "cloud computing" but not everyone issure what it really means. Essentially, cloud computing involvesaccessing data or applications via the Internet. There are manydifferent configurations of cloud computing. Public clouds useshared infrastructure to host data or applications for multipleclients who share in the economies of scale. Private clouds usededicated hardware for more secure applications. Regardless of theconfiguration, the cloud can be used to offer SaaS.

SaaS applications are most often accessed through your webbrowser. If you've ever used a web e-mail provider like Gmail orYahoo Mail, you've used an SaaS application. So why is the cloud sopopular? It allows companies to avoid having to install and supportapplications on individual computers. That makes SaaS applicationsmuch more cost effective for large enterprises.

How does fraud analytics work in the cloud?

Fraud analytics involves the use of data and statisticaltechniques to identify suspicious activity that warrants furtherinvestigation. There are a number of different approaches andanalytical methods that can be used, but the premise remains thesame across all fraud analytics solutions: Accurately find moresuspicious activity faster than the old-fashionedway. 

Using a cloud-hosted, or SaaS, approach carries three keybenefits:

1. Speed. Installing a traditional on-premisesolution can take months. It involves procuring hardware, doinginstallation and configuration work, and allocating resources fromalready over-burdened IT departments. Because SaaS deploymentseliminate most of this work, they can usually be deployed in lessthan half the time of traditional on-premise projects.
2. Affordability. With the economies of scalegained in cloud operations, most SaaS applications can be offeredat a lower price point than their traditional counterparts. SaaScan often be billed on a pay-per-use basis and recognized as anoperational expense. For some organizations, this is preferable tothe large upfront investment of a capital expense.
3. Security. Cloud computing involves sendingdata over the Internet, but that does not mean the data isunprotected. When properly configured, SaaS applications are verysecure. Most reputable cloud hosting providers likely spend farmore on security technology than your company's ITdepartment. 

Next page: Three things to keep in mind when lookingfor a cloud fraud analytics provider

Shopping for fraud analytics in the cloud

If this approach sounds like a good fit for your organization,consider three things when looking for a cloud fraud analyticssolution provider:

• Another asset that provides speed and efficiency in SaaSprojects is the use of consistent, repeatable pre-built components.Evaluate which components are available "off-the-shelf" and whichones require extensive configuration or customization. Look forthese common pre-built elements: data model, data quality andentity resolution routines, fraud detection scenarios and models,intuitive user interface, and administrative and managementreports.  If these things are not available, they may addtime and cost to your project.

• Don't assume that a vendor provides adequate security. Look forsecurity certifications. A SOC 3 report will provide information about howa provider complies with industry standards for security,availability, processing integrity, confidentiality, and privacy. ATRUSTe EU Safe Harbor certification indicatesthat a provider complies with the stringent European dataprotection regulations. Talk to your own information securitydepartment who can help evaluate whether a provider meets yoursecurity requirements. Some organizations choose to do their ownaudit, either remotely via a detailed questionnaire or in-personvia an on-site inspection. As part of your security review, don'tforget to check on the Service Level Agreements around guaranteeduptime, disaster recovery, and support.

• Finally, be sure that any provider you choose understands yourbusiness. Look for domain expertise and consultants that haveworked in fraud investigation roles in your industry. Frauddetection in insurance is complicated. Jurisdictions have varyingregulations that can impact fraud types. Each insurer has adifferent book of business that may influence the type of fraudexposure observed. Make sure that the partner you choose has theknowledge to tune your solution in a way that best fits your dataand your business. This will help insure that you get the bestresults.

Cloud hosting options make fraud analytics solutions moreaccessible to insurers of all sizes. More and more companies arechoosing this approach. For those companiesresearching fraud analytics technology, a cloud hosting option maybe the best way to get started.

James Ruotolo is an insurance fraud technologist, thoughtleader and the principal for insurance fraud solutions atSAS. Connect with himon Twitter.