Filed Under:Claims, Investigative & Forensics

8 ways social networks help identify fraud

The term Social Network Analysis (SNA) is often errantly associated with the type of social networking accomplished via social media.

Social networking involves building relationships or sharing information via online social media apps like Facebook, Twitter or LinkedIn. Conversely, SNA is an analytical approach used to establish important relationships and links among people, places and things which might be unknown to insurance personnel at the time of claim.

The role of SNA in claims

For insurance carriers, the differentiation between SNA and social media is an important distinction. Claim's adjusters and investigators often examine a claimant's social media activity for inconsistencies and misrepresentations while validating claims documentation. That's proven to be a valuable part of the investigation process.

On the other hand, the social networks uncovered when analyzing insurance claims data are characterized by the people, places and things in an insurance transaction and the interconnectivity between them.

In claims fraud detection, SNA is both an analytical and visual tool that helps discover, analyze, and visualize social networks and expose dishonest actors who are exploiting insurer vulnerabilities.

1. Increased view of network activity.

SNA uncovers such things as shared home addresses, business addresses, bank accounts, home telephone numbers, cell phone numbers, automobiles, medical providers, lawyers, repair shops, policy numbers, payments and claims. Having this information readily connects individuals who were otherwise not known to have a business or personal relationship, which is often indicative of fraud.

Absent an effective SNA tool, the links between individuals and entities likely goes undetected given the voluminous amounts of application, policy and claims data routinely collected and processed by insurance companies today.

2. Paying claims efficiently.

While the existence of a social network might initially seem suspicious and indicative of fraud, further investigation may determine that the apparent connectivity between certain individuals and entities is innocuous and easily explained.

That's one of the profitable returns of effective SNA. It helps build a complete real-world, real-time picture of claims activity and slashes claims fraud without hurting genuine customers.

Because regulatory requirements dictate claims processing service level agreements (SLAs), time is at a premium and the priorities are to pay legitimate claims faster. SNA snapshots streamline the investigative process and reduce money spent on bad claims, while providing a clear picture of social networks.

Avoiding “pay and chase” is imperative. The added network view helps adjudicate legitimate claims quickly and intuitively, while referring suspicious or potentially fraudulent claims for further investigation. Paying legitimate claims quickly increases adjuster performance and customer satisfaction, while simultaneously decreasing costly churn and driving down fraud risk.

3. Regulatory benefit.

Strong analytic processes offer significant benefits to insurers beyond simply identifying connected individuals and preventing the payment of fraudulent claims.

In most states, insurance carriers are required to complete annual documents which detail their anti-fraud efforts. Aside from having a more proactive, holistic cost saving claims operation, through the use of different tools, insurance carriers have a more robust story to tell regulators about their anti-fraud programs.

social networking analysis

SNA provides investigators with a visual means of seeing commonalities between shared data points. (Photo: iStock)

4. Identifying organized criminal activity.

If senior insurance executives were asked how much organized fraud is committed against their organization and what the corresponding losses associated with that fraud type are, they likely wouldn't know.

Effective fraud prevention, however, dictates that management does know what's going on inside the network and who is committing fraud against their organizations. The brilliant Chinese military strategist Sun Tzu said it best with his “know your enemies” philosophy, and that definitely holds true when it comes to fighting organized ring fraud.

The more you know about groups, their methodologies and attack strategies, the better positioned your company defenses will be. SNA provides the investigator with a “top down” visualization which establishes the commonality between shared data points. These connected data points often signify organized criminal activity, which if undetected, generates large scale losses; diminishing return on investment (ROI) and bottom line profitability for insurance carriers over time.

The technology allows investigative teams to expose sophisticated bad actors and groups that were previously undetected, and identify high probability information which is relevant to the claim.

5. Better data yields better results.

An important consideration in identifying patterns of nefarious activity and organized crime rings operating in a network is the volume and quality of data gathered by anti-fraud detection tools.

While SNA connections are created from existing network data and real time or batch data fed into the system, the amount and quality of the data insurers have access to has a definite impact on the ability to successfully identify anomalies and connections within the claims data.

While adding third-party data sources doesn't solve everything, data enhances the identification of anomalies and generating SNA connectivity.

In 2015, an Association of Certified Fraud Examiners (ACFE) article by Clopton, Morrow and Heitger stated: “The proliferation of e-mail, messaging, electronically stored documents and social media not only provides a rich repository of data for social scientists, but also provides a platform for analysis of relationships in fraud examinations.”

6. Technology transition.

Frequently, carriers operate multiple legacy claims systems, which compound the challenges of investigation and impede SNA automation. Multiple systems decrease adjuster efficiency since they add additional steps to effectively adjudicate and pay claims.

Streamlining the investigative process and reducing operational ineffectiveness are important. Automation is critical to achieving SNA and effective fraud detection. Not only does it present a clearer picture, but it reduces the time spent on identifying social networks, increases ROI and frees up staff to perform other claims related and investigative functions.

social media relationships

Successful utilization of SNA requires a holistic view, not just a bottom-line approach to loss numbers. (Photo: iStock)

7. Overcoming resistance.

Despite the move to more technology-based anti-fraud programs, the Coalition Against Insurance Fraud found that as many as one-third of property and casualty insurers surveyed, remain skeptical about its ROI.

It is important to take a holistic view and not just look at the bottom line loss numbers. Automating processes like SNA, fraud detection and case management is not only effective, but is also an integral part of annual regulatory anti-fraud plan reporting. It generates both operational efficiency and staffing savings while producing higher quality data, information and investigative performance.

8. Decreased ROI.

It is frequently thought that claims management operations supported by ineffective analytic tools aren't as profitable as they can be.

In their 2014 State of Insurance Fraud Technology report, the Coalition Against Insurance Fraud found “about half of the insurers (53 percent) cited lack of IT resources as the stumbling block in implementing anti-fraud technology.”

Understanding what is transpiring in a network and the connectivity of claimants to other people, places or things that a company has either already successfully processed or investigated for fraud is critical. SNA provides that ability by illuminating what might otherwise go undetected.

The bottom line

Insurance companies are in the business of protecting against risk. Part of the risk equation involves paying legitimate customer claims in an expedited manner. Companies that pay fraudulent claims because they aren't armed with all the information necessary to make informed claims decisions aren't as profitable as they could be.

Further, bad claims practices decrease a company‘s competitive edge, resulting in lawsuits, reputational damage and diminished customer and shareholder confidence. These issues draw the attention of regulators and may result in expensive and time-consuming audits.

When it comes to battling fraud, it's critical to have the right tools in place and SNA is an important piece of the anti-fraud puzzle.

Dan Draz ( is a senior business solutions consultant at BAE Systems where he focuses on financial crime across a number of different industry verticals. Erin Smith ( is a business solutions consultant at BAE Systems where she focuses on fraud in the financial crime and insurance verticals. 


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