The process changes that are taking place in the insurance world are massive. More and more insurance companies allow for remote sales of life products and entire sales processes have been simplified for the benefit of the customer. However, opportunities for abuse arose with them as well. A simpler process may result in the omission of certain elements of the procedures. What's more, the importance of selling via digital channels has also increased, and the digitization of all the organization's work and operation has grown - remote work is one example of that.
How insurers respond to new digital challenges
Specialists in insurance companies have become process operators and people who monitor processes as they happen automatically. All of this means that new types of fraud may emerge in the insurance sector - ones already known to us from the world of online banking and digital transactions. The industry must be able to respond to them efficiently to limit the scale of the damage. The methods of detecting and blocking undesirable phenomena - including fraud - need to be very fast as well.
There are procedures related to fraud detection in the claim adjustment process. For example, previously reported damages are verified. Teams of experts (data analysts) who deal with such verification are created. Today, they form the main core of the security departments for fraud detection in insurance companies. Such teams also include operational investigators who, based on their extensive experience, can assess whether a given case is fraudulent.
Advanced analytics to battle fraud
It is important to remember that abuse is not only an issue that affects customers and agents, but also employees and associates. Our experience shows that organizations focus mainly on detecting external frauds, i.e. those carried out by clients. But unfortunately, these clients are often supported by people from within the organization.
Not reacting to fraud with analytical capabilities might be indeed tempting, but it only works in the short term and is certainly not beneficial to the organization or its stakeholders. What could be the consequences of this approach? First, we introduce all clients to the organization, including dishonest ones that ultimately cause the entire client portfolio to deteriorate. In a sense, we also support unfair practices that naturally hurt the reputation of the entire organization. This will result in a decline in sales in the long run.
Letting such dishonest customers into the organization negatively impacts the position of honest customers. The dishonest chunk of the customer base is smaller, but it generates a lot of loss that someone has to cover. So an honest customer will pay a higher, unfair premium because the entire customer portfolio needs to stay profitable. This will again translate into a poor image of the company and a decrease in sales. Moreover, insurers operate in a certain regulatory environment, and the global policy is that fraud should be combated.
What does the future hold for insurance companies fighting fraud?
On the one hand, we will observe the growth of fraud forms that have existed so far. This means that investments in both knowledge and infrastructure will still be necessary. On the other hand, this shift towards digitization will require insurers to rapidly build these verification systems and invest in new analytical capabilities to run their businesses in the future successfully.