It is no surprise that one of the main approaches in the insurance industry today is reducing fraud, after all, this is one of the problems that causes one of the biggest losses in the industry  

  • Don't believe us? Let's take a look at some interesting data of insurance fraud around the world (Legal Jobs, 2021)
  • In 2019, UK insurance companies registered 300 insurance frauds per day.
  • An average fraudulent claim in the UK in 2019 was worth £11,500.
  • 30% of insurers said they increased the rate of fraud screening during the COVID-19 pandemic.
  • Insurance fraud causes $80 billion worth of damage to American consumers every year.
  • There was $3.1 billion worth of false health insurance claims in 2020.
  • Only 1% to 3% of life insurance claims are investigated for fraud or outright denied when first filed.
  • From 2016 to 2020, improper payments for home health declined by roughly $5.9 billion.
  • Insurance scams cause $29 billion of damage to auto insurers annually.
  • Only 10% of insurers use algorithms to flag suspicious claims.
  • Roughly 85% of insurers have dedicated investigation teams.

All of these facts just show how the industry is still struggling in finding a way to mitigate the risks and effects of fraud. Nevertheless, there are some figures that show some hope that the situation can improve. Although only 10% of companies use algorithms to track alleged fraud, this is expected to increase considerably in the coming years. Also, the insurance fraud detection industry is expected to grow by 17.4% within the next five years. All this is mainly due to the use of new technologies applied in the industry, whether it be machine learning, AI, Blockchain, etc. They can revolutionize the fraud detection system. In fact, there are already some Insurtech companies focused just on decreasing the fraud claims. 

One of the most important companies focusing in Fraud detection is Shift Technology which addresses several critical processes throughout the insurance policy life cycle. Basically, this Insurtech helps insurers achieve faster and more accurate claims and policy resolutions. They detect potential insurance claim fraud with a 75% hit rate and currently work with leading insurers in more than 25 countries. Likewise, Sprout.ai is another Insurtech focused on fraud detection. They combine the power of contextual AI to simultaneously automate claims and filter fraud. Thanks to AI, they can enrich consumers’ data sprouts from individual claims by up to 300 per cent.


But… How technologies combat fraud?

There are many ways that new technologies can help reduce fraud in the insurance industry, some of which are as follows:

Anomaly detection: Anomaly detection has been a key trend in cybersecurity endeavors, with various use cases such as fraud prevention. In the case of insurance fraud, machine learning (ML) models learn what a normal claim looks like to establish a baseline. Once that baseline is defined, they can detect abnormalities and caution safeguards.

Predictive analytics: Similarly to anomaly detection, predictive analytics involves training artificial intelligence or machine learning algorithms using historical data, in order for them to ultimately forecast future incidents. Data analysis can find patterns in the claims and point out dubious ones. The potential for predicting vulnerabilities in a claim’s handle is clearly very appealing to insurers who would be able to pick up important time and act to anticipate instead of responding to unravel extortion.

Blockchain:  Blockchain ledger keeps a permanent record of transactions without the use of a centralizing third-party. Any new information added into the ledger is automatically synced for all those involved. Essentially, every block links to a previous block, and they all have time/date stamps. Storing claims information on a shared ledger would help insurers collaborate and identify suspicious behavior across the ecosystem.


As we have seen, technology can be a powerful tool in the fight against insurance fraud. By using data analytics and machine learning, insurers can more quickly and accurately identify fraudulent claims. In addition, by working with tech startups and other innovative companies, insurers can stay one step ahead of the criminals. Insurance fraud is a serious problem, but with the help of technology, we can hope to reduce its impact.


Source:

https://legaljobs.io/blog/insurance-fraud-statistics/