For years, insurers have attempted to remedy fraud only after a claim is paid out. Now, thanks to the maturation or predictive analytics, behavioral modeling, and technology capable of real-time processing of high-volume data, insurance companies are moving from prosecution to prevention.
Insurers are acheiving this by discovering fraud before claims pay-out – during the claims adjudication process or even earlier in the insurance life cycle. Find out what Aite Group thinks about fraud-busting technologies in thier 'P&C Insurance Fraud Solutions: Beyond Pay and Chase' report.
Key report impact points
- Aite Group reviewed 26 fraud solution vendors through interviews, briefings, and product demonstrations with C-level executives and product managers of software companies that provide fraud prevention, detection, or management are based in the United States, United Kingdom, or Europe.
- P&C insurance fraud sizing estimates typically vary from $30 billion to $60 billion, with some estimates reaching much higher. Fraud prevention represents a huge opportunity for insurance companies to expand their profit margins, with total fraud losses estimated at nearly five times the amount of credit card fraud in the same time period.
- Insurance companies continue to focus on claims segmentation and analysis for managing fraud. While the majority of insurers have a fraud solution in place, nearly three-quarters of them only target claims. Improvements in analytics have enabled vendors to detect potentially fraudulent activity prior to paying out claims. Now fraud can be managed not only through claims and investigations but also through solution types, such as authentication and verification solutions, business intelligence and data warehousing solutions, and point solutions such as property insurance theft losses.
- Most P&C Insurance Fraud solutions offer common capabilities, regardless of solution type, including predictive analytics, behavioral analytics, and rules engines. A select few vendors offer more advanced capabilities, such as text mining, device fingerprinting, visual link analytics, voice analysis, image analysis, and use of social media data.
- The key trends in P&C insurance fraud cluster around issues of data security, emerging data and technology, and multichannel fraud management for both agents and devices.
- Data breaches, regardless of industry, were projected to impact over 800 million records by the end of 2015. As a result, personally identifiable information (PII) becomes less and less reliable, pushing vendors to use other sources and types of data to verify and authenticate entities. These emerging data sources include device data, document verification, weather information, social media information, telematics, and geospatial data.
- Common insurance fraud schemes are not going away; however, new and more complicated fraud schemes that target data in addition to dollars are on the rise, exposing policyholders, agents, and ultimately insurance companies.
Aite Group expects that detecting fraud at the point of quote or application will increase at a greater rate than it has in the past 15 years.
BAE Systems believes that investing in the more advanced analytics tools is the answer to “‘how can I combat increased levels of insurance fraud?”. It will be the key enabler for detecting fraud earlier at the point of application.