For many years, the public in general did not regard insurance fraud as a serious crime. Public opinion polls revealed that many believed insurers were only slightly harmed financially and often saw it as a way of recouping the many dollars in premiums they had paid. In a word, insurance fraud was considered a victimless crime.
However, during the late 1980s and early 1990s, insurers began to stress that insurance fraud was a real problem and, more importantly, that it was growing at an alarming rate. With help from the industry and government agencies, insurance companies created specialized units devoted to the detection and prevention of insurance fraud.
In the past 20 years, industry collaboration and recognized goals have led to advances in insurance fraud awareness. With the help of industry-wide associations and public officials, the misnomer of insurance fraud being a victimless crime has dissipated. Public awareness campaigns have successfully shown that not only does insurance fraud result in increased premiums for insureds, but that it also creates a strain on company resources. Staged car accidents and arson have caused the injuries or deaths of innocent civilians and public servants. As a result, the public has grown much less tolerant of fraud.
Despite all of these efforts, however, the National Insurance Crime Bureau (NICB) estimates annual fraud losses to be in excess of $30 billion. Therefore, it is critical that we continue to actively fight insurance fraud.
The key to successfully fighting insurance fraud is to develop and maintain a heightened level of awareness among all claim associates on the front line and provide them with the best tools and technologies to identify fraud. This includes inside claim handlers, field appraisers, and analytical units.
Combating insurance fraud is a collaborative effort. Inside and outside adjusters, as well as field appraisers, need to work together to determine the authenticity of every claim. Armed with additional information from the analyst team, claim handlers have a more complete picture regarding a loss. Creating and maintaining a heightened sense of fraud awareness through training provides claim handlers and appraisers with the proper tools to identify fraud. This ultimately provides the insured with a better level of service.
To achieve a high level of awareness among associates, companies need to devote quality time to ongoing fraud awareness training classes that teach claim associates the key fraud indicators and their importance. Additionally, companies need to invest in new technologies that arm analytic teams with the tools — and appropriate training — to work with front-line adjusters and appraisers to fight fraud.
Finding Fraud
Because of the ever-changing fraud schemes, associates need to stay abreast of the most recent fraud trends and techniques. Providing associates with quality objective indicators of fraud increases the likelihood that all investigations will be based on solid referrals that are appropriate for further inquiry. To protect the company's reputation and utilize associates' time wisely, it is critical to investigate files that have sufficient objective indicators of potential fraud. Often, fraud indicators — if not closely scrutinized with objective factors — can be confused with simple misunderstandings, a lack of information, or miscommunication between an insured and a claim representative. By training associates, companies can protect their reputations and relationships with their customers, preserve their associates' valuable time, and help ensure appropriate claim handling at all times.
When designing a training session, companies should keep their audience in mind. Know if you are speaking to a seasoned group of professionals, new recruits, or a mixture so you know how much background on insurance, claims, and fraud you need to provide. In addition to covering general fraud elements, training should incorporate tailored information for the type of claim and method of contact — in-house, field, or analytics. The goal of the sessions is to supply enough of a context for associates to understand the magnitude of the problem while equipping them with practical tools for detecting and preventing fraud.
From personal experience, I always find PowerPoint presentations that incorporate short videos or news broadcasts of fraud stories to be a great medium for training sessions. Also, it is a good idea to work with state insurance divisions to qualify these sessions for credit to increase participation and retention among associates. Many states require continuing education for claim handlers. As a result of offering continuing credit, MetLife Auto & Home has seen a significant increase in requests for training that goes above and beyond the introductory, required, or site-specific training the company normally provides.
Inside claim handlers play a very important role in the early detection of insurance fraud. Not only do they often make the first contact with the insured, but they also have the benefit of reviewing all of the information and witness accounts shortly after the date of loss, increasing the chance of identifying accurate fraud indicators.
Training should cover the various forms of insurance fraud as well as the objective indicators and best practices to verify accuracy of submitted documentation. As the front line, adjusters must know how to properly take accurate statements, use expert sources, and refer appropriate files to SIU. Many databases and web resources are underutilized because people have difficulty navigating them. As such, associates should learn database and web site search techniques to improve their comfort and skill levels in using these tools.
Three-Pronged Approach
At MetLife Auto & Home, our last fortress of defense against fraud uses the marvels of modern-day technology. In addition to having first-rate claim associates that catch many of the fraudulent claims, we have designed a fraud screening system with Computer Science Corporation that takes full advantage of the latest technology to provide the ultimate "safety net" against fraudulent claims. The Fraud Evaluator system uses three different approaches to score and flag potential fraud: predictive modeling, identity search, and business rules. Each engine carries out a different job and offers invaluable insight into the scored claims so that SIU analysts can complete their triage process to identify fraudulent indicators. The functionalities of each engine are outlined below:
Predictive modeling looks for inherent patterns within the claim data. It compares new claims to a model of claims previously referred for investigation. Predictive analytics also includes text mining, which searches for keywords and phrases within the unstructured data of a claim. Many of these keywords and phrases can become lost or are missed when being manually reviewed. Predictive analytics continuously look for both the inherent patterns and the lists of words in order to help identify potential fraud.
Identity search matches the people, organizations, and vehicle information involved in the claim against different databases such as Sanctioned Doctors, NICB, and so on. All of these databases collect viable information about people and businesses involved in insurance fraud. This engine can search multiple databases simultaneously and calculate referral scores based on the type and number of matches.
Business rules are industry-known indicators and other ad hoc rules that help identify new fraud schemes. Often, these business rules incorporate past fraudulent claim experiences that can be referenced in the future. With this capability, a customized search engine is created and can then be tweaked with regional or national search criteria.
Expanding Your Horizons
Once a well-run fraud prevention program is developed, consider broadening the audience to other departments within your company. Providing awareness training at the sales and underwriting levels, for example, can help identify potential identity fraud issues as well as premium avoidance schemes. Developing good lines of communication between all departments coupled with training and awareness efforts further strengthens your defenses against fraud.
As you can see, a comprehensive, tactical model is composed of a blended approach that incorporates several components. Using the human element to become attuned to potential indicators of fraud — in conjunction with leveraging system-run defenses — ensures a quality fraud prevention system.
Creating and maintaining a heightened level of fraud awareness along with developing a streamlined process for referring suspect claims to the SIU will improve insurers' success rates in the fight against insurance fraud. In addition, a consistent and persistent procedure to detect and prevent fraud will not only help protect the financial stability of your company, but it will also help create a positive deterrent effect to benefit the entire insurance industry.
MetLife Auto & Home works diligently to enhance training efforts and analytical tools to drive more appropriate referrals into SIU for review and investigation. It was an important metric for us to see an increase in referrals while staying consistent in the quality of claims being referred. As a result of these efforts, we have seen the number of investigations triple since implementing these programs in 2002. These efforts not only improve the bottom line but they also provide a higher level of service for customers and establish the company as one that will not tolerate insurance fraud.
Robert Bodoni is regional manager, special investigation unit, for MetLife Auto & Home. He may be reached at 978-458-7192, ext. 3165; rbodoni@metlife.com.
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