The insurance industry should remain braced for an increase in insurance fraud – history tells us that each previous economic downturn or restructure in recent memory has been accompanied by elevated levels of insurance fraud. Government measures to protect industry, commerce and society generally have shielded the majority. As we search for the new normal, many businesses and consumers will start to suffer the financial impact. For some, the closure of businesses, financial hardship, pressure to repay loans, and the loss of jobs will drive them to exaggerate genuine claims or invent the wholly spurious. Many will be encouraged and shown the way by rogue accident management businesses.
We are already seeing restructure causing fraud issues for insurance clients across multiple lines of insurance business. We have also tracked the adaptability of claims farmers and accident management businesses. The foothold organised insurance fraudsters gained in the motor insurance space 10 to 15 years ago is one they are resistant to relinquish. Claims farmers have a vested interest to protect – spurious and deeply exaggerated property claims, business interruption claims, data protection breach claims, cyber claims, escape of water, deliberate damage claims are all on the increase. Let there be no doubt that staged and contrived accidents, and building fire claims are still very much a ‘go to’ option for those in need or greed.
I have long advocated that an effective counter fraud solution requires a combination of technology, effective process, and human experience, expertise and intelligence. Intelligence-led solutions based on the effective identification of the right claims for investigation but informed by the expertise and experience of people.
Insurers now accept and expect the collection and analysis of vast datasets within their own eco system, their supply chain partners and at industry level. The ability of artificial intelligence software to accurately identify and predict insurance fraud is advancing at a remarkable pace. However, data and analytics will only ever be part of the solution -having all the data is one thing – knowing what to do with it is something entirely different.
The effective management of intelligence and the investigation of claims requires experience and expertise and will continue to do so. The digitalisation of the claims process, accelerated by COVID-19 has created fraud risk for some (cyber claims and data breaches) but opportunities for some – fraud practitioners would have resisted the move to fraud investigation by MS Teams or Zoom. In reality, video recorded accounts, are at least as effective as traditional field investigation in the majority of cases. The technology is augmenting the prevention, detection and management of fraud but not replacing the people – it should be and is allowing them to be more effective.
Data and data analytics through artificial intelligence software will facilitate the ever more accurate identification of high-risk claims, and identify patterns indicative of key fraud enablers at work. The software models will inform the strategies that insurers and their partners should adopt to counter the continued and growing threat of insurance fraud.
However, it is the skill, expertise and experience of fraud practitioners that will remain necessary to deliver the fraud strategies and indemnity spend control the investment in technology demands. The future of fraud protection – both real and artificial intelligence.