Recently the City of London Police released some shocking fraud stats, which showed a 61% jump in cases earlier this year. Here’s the IFB news on IE. It’s likely to have a knock-on effect on claims inflation, plus if it isn’t stopped others may chance their arm with a slightly dubious claim, or exaggerate the severity of an existing one.
Here are some comments from Rory Yates, Global Strategic Lead, EIS, in response to soaring fraud;
Fraud and recession are a match made in insurance hell, and the UK market is headed for a perfect storm as events and advanced fraud capabilities collide. With so many factors coming simultaneously – inflation, the fuel crisis, Brexit, the war in Europe, global food shortages, and political and economic uncertainty – financial waters are extremely choppy, and recession is almost inevitable. Couple this with rapid technological changes enabling complex fraud capabilities, and you have an explosive mix.
According to the City of London Police’s Insurance Fraud Enforcement Department (IFED), opportunistic insurance fraud cases, such as exaggerated claims and false applications, have jumped 61% year-on-year from March 2022 to April 2023. Opportunistic means it doesn’t follow a discernible pattern, making it challenging for insurers to spot.
However, with transformative fraud detection improvements available and many insurers cited as adopting them, one would assume this would be far more avoidable than it appears. But data suggest it remains rampant.
What’s Needs to Happen
To meet fraud head-on, insurers need quality data that can be easily integrated, real-time analysis, privacy & security compliance and the ability to incorporate fraud naturally into the claims experience for customers and employers.
When this happens, you can detect fraud using advanced scoring models that identify bad actors while clearing appropriate cases for straight-through processing. In modern software platforms, this means improving fraud detection, customer experience and reducing the overall cost of claims simultaneously.
However, it also requires other factors, such as eFNOL capability and the ability to integrate seamlessly into native AI, ML decisioning and anomaly detection capability, which is typically unavailable to most insurers today.
Data from our clients show that doing all this will improve detection rates dramatically, with 87% of all cases flagged as “high” being closed as fraudulent and a false negative rate as low as 0.03%.
What’s Going Wrong
Legacy technologies and a compilation of disparate systems that sit in isolation and are almost impossible to bring together to create a single view of the customer. Orchestrating this experience with fraud capability is not possible for most insurers to realise. To avoid the reckoning to come, insurers must jettison legacy mindsets that put the policy at the heart of their business and create a connected ecosystem that puts the customer there instead.
The ROI in these areas is high, and the opportunities to integrate and scale new solutions mean the risks are only in not acting on this potential.
Opportunistic fraud is on the rise, which has a considerable impact on all insureds, and the time to act is yesterday.
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