Insurance fraud in Florida has been one of the main drivers of the ballooning losses that have fallen on the reinsurance industry in recent years. (Credit: designer491/Shutterstock)
Fraud drives up costs for all customers, leaving them to cover the shortage. The more insurers can crack down on system abuse, the more they can help stabilize the market for customers in the long-term. AI and historical aerial imagery can help insurers with this goal and prevent similar situations breaking out elsewhere in the global insurance markets.
Florida, for instance, is constantly battling Mother Nature and often gets battered with intense storms and other climate catastrophes. After the huge losses sustained from the 2004 and 2005 hurricanes, many insurance companies stated they would stop offering property insurance to homeowners. As a result, those who have managed to find cover are paying almost double the national average, as insurers are expected to further raise their costs by around 12% to nearly 40% during the coming year.
In addition, customer wallets are tighter than ever in 2023 as the U.S. is on the verge of a cost-of-living crisis spurred by a rapid increase in inflation. As the world faces economic downturns and customers become more willing to try their luck, insurers need to protect themselves from both opportunists and large scale criminal gangs seeking to swindle pay-outs.
As the protection gap grows, some homeowners are at risk of losing everything once a natural disaster hits. As climate change is driving more disasters, shooting up premium prices, insurers need to make sure they crack down on their losses, including fraudulent pay outs.
The Coalition against Insurance Fraud indicates that fraud costs businesses and consumers $308.6 billion a year. Property and casualty insurance fraud more specifically costs businesses around $45 billion. To counteract fraudulent losses, insurers are forced to increase their premiums for customers. This is a lose-lose situation for both insurer and customer as companies struggle to make successful profit margins whilst offering competitive coverage to buyers.
Technological advancements have been slow to break into the insurance industry, however, in recent years, artificial intelligence has surfaced as a powerful tool for detecting fraud. AI can be leveraged alongside image analytics to provide a first filter for fraud detection. Together, these tools are modernizing the insurance industry, increasing efficiency, improving customer experience, and lowering overall costs.
AI and aerial imagery vs. fraud
Insurers are losing large sums of money by failing to detect insurance crime. This is perhaps most obviously true for property insurers, with around 10% of property and casualty losses resulting from fraudulent claims.
Aerial imagery-generated data has the potential to greatly assist property insurance carriers in coping with fraud. One area where historical imagery data becomes invaluable is in claim qualification. By analyzing aerial imagery, insurers can identify when a change occurred and link it to a cause, such as a natural catastrophe. This helps determine whether the property was genuinely damaged and provides evidence to support or refute a claim.
Furthermore, aerial imagery data can assist in assessing the scale of the damage. Similar to claim qualification, this data can indicate the magnitude of the damage, when it occurred, and even the source of the damage. Insurers can use this information to accurately evaluate the extent of the claim and verify its validity.
Post-natural catastrophe events, the ability to analyze aerial imagery quickly becomes crucial. By promptly assessing the imagery, insurers can obtain a clear picture of the damage at a specific point in time. This helps prevent fraudulent claims for damage that occurred after the event, safeguarding the interests of the insurance carriers.
In addition to these benefits, the scale of aerial imagery data enables change detection. By analyzing patterns and correlating data from a large number of claims, carriers gain a powerful tool for directing their focus. Rather than manually inspecting each claim individually, insurers can use this technology to identify trends and anomalies. This streamlines the claims investigation process, allowing carriers to concentrate their resources on cases that require further scrutiny.
The future of fraud detection
Overall, aerial imagery-generated data provides property insurance carriers with valuable insights and tools to combat fraud effectively. By leveraging historical imagery data, carriers can accurately qualify claims, assess damage extent, and detect changes on a large scale. This technology becomes particularly crucial post-natural catastrophe events, where swift analysis of aerial imagery helps prevent fraudulent claims. By streamlining the claims investigation process and focusing resources more efficiently, carriers can better protect themselves against fraud and provide their policyholders with more accurate and fair coverage.
Izik Lavy is CEO and co-founder of GeoX, a company that provides P&C insurers with rich data generated from aerial imagery and utilizes deep learning and computer vision technologies to automatically generate global insights.
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