BAE Systems

The insurance market was set to hit new highs in 2020. Then COVID-19 happened. While market growth projections are in a state of flux, one thing that isn’t abating is fraud. It’s anticipated that insurance fraud will result in $80–100 billion¹ of lost revenue this year.  Here are five key trends that insurers need to be aware of as they fight fraud in this new (and ever changing) environment.

Trend #1: The new era of fraud investigation

Modern fraud is transnational and agile, so the insurance industry can’t rely on fighting it with traditional, labour-intensive techniques. Fraud fighters need nuanced skillsets to identify the tactics modern fraudsters are adopting.

While they are gathering data to build cases that will result in criminal prosecutions, they must pay close attention to privacy laws that are more stringent than ever before. In the age of GDPR and the California Consumer Privacy Act, the gold standard is intelligent actionable evidence collection. So, although today’s investigators have more tools at their disposal, they also face more onerous demands.

Trend #2: The significance of social media

Social media plays a central role as a primary source of intelligence. Many leading insurers now have a dedicated team of social media analysts. While human expertise will always be critical, the uptake of automation and artificial intelligence is accelerating.

BAE Systems’ tools are able to sift through social media content and unearth evidence of potential fraud, crunching through data in minutes rather than days. API compatibility is important too – giving our customers the ability to use any data source and integrate tools seamlessly into their environments.

Trend #3: The collapse of silos

Until recently, fraud scams were fairly rudimentary. Fraudsters would steal an identity, create synthetic IDs and execute criminal activity. It was a repeatable, linear and somewhat predictable process.

Today, criminals are subtler in their approach. They stage accidents, perhaps using technology to make their shams appear more legitimate. Or they might use cryptocurrencies to hide payments and transfers. One area that insurers need to be particularly conscious of is silos. Whether they’re within departments or interdepartmental, silos enable fraudsters to execute their scams. Insurers must embrace a 360-degree view of fraud. 

Trend #4: The crucial role of consortiums

The value that consortiums offer the insurance industry is increasing. They provide a bird’s eye view of transactions and shine a spotlight on suspicious activity across multiple carriers and lines of business. BAE Systems currently works with three consortiums, bringing data from different financial services sectors to create a comprehensive picture of criminal financing and money laundering.

Trend #5: More products, more opportunities

Both existing and new insurance products are under threat, but as more insurance products are introduced, the surface area for fraud grows. Just consider two of the most established lines – life and healthcare insurance. They can both be manipulated by entering incorrect details or masking underlying conditions to avoid high premiums. Large, well-established companies can afford to fight emerging fraud techniques but smaller niche firms can’t – and sadly, they’re often the ones targeted.

To conclude, global insurers need a partner with a track record of anticipating trends, so they can get ahead of the fraudsters. BAE Systems has the human expertise and machine intelligence to do just that.