Anyone in the insurance industry knows that fraudsters are becoming more sophisticated and their crimes more difficult to identify. Insurance fraud in the UK costs an estimated £3 billion per year – but only around a third of that is detected.

Whilst opportunistic fraud poses a problem to the industry and consumers, the calculated high-value fraud is most damaging. Often linked to serious organized crime, those responsible have little regard for the millions of honest policyholders who inevitably cover the costs.

What makes this type of fraud so unnerving is the fact that criminals understand where different insurers’ system vulnerabilities lie and collude with each other to exploit them.

They know which companies are more likely to pay out for whiplash or travel claims and whether they’ll get a better result with an ENoL (Electronic Notification of Loss) or a telephone claim. As well as targeting claims fraud, there is also an alarming rise in application fraud and ghost broking, making the most of poor identification processes and leaving unsuspecting customers without a valid policy.


96% of insurers rely on technology to detect fraud

Given the complexity of modern fraud, it’s no surprise that companies are looking for new ways to tackle it. Our research shows that nearly all insurers (96%) now use technology to detect fraudulent claims. That almost 40% use identity verification solutions. They’re also planning to invest in advanced analytics – including predictive modelling (54%), automated red flags/business rules (41%) and artificial intelligence (28%).

Untangling motor fraud cases is notoriously difficult when body repair shops, solicitors and the perpetrators are all in on it. The use of advanced analytics will help them to spot patterns on a large scale, far quicker and more accurately than manual processes.

Sharing is caring or is it?

Questions remain about the extent to which insurers should be obliged to share fraud intelligence with the broader industry.

Insurers aren't blamed for their hesitancy, especially in a highly competitive market where the profit margins on motor insurance premiums, in particular, are extremely tight. Some will ask why their rivals should benefit from their intellectual property when they were the ones who used their resources (technology and people) to detect the fraud in the first place. And a large firm may also wonder how a smaller one with fewer resources can make a meaningful contribution to the body of industry intelligence.

However, I believe that the more insurers share information, the more likely the fraudsters are to hit a wall, and this brings net benefits for everyone. It has a snowball-like effect, with every piece of information contributing to the bigger picture, no matter how small it might seem.

It allows police to swoop faster on criminals and secure a conviction, helping to deter others. These convictions can dismantle gangs who, let’s not forget, are often involved in other illegal activities such as people trafficking and drugs, so insurers have an ethical and social responsibility at least to use their data for good.

But there are other commercial benefits to sharing intelligence too, just as the fraudsters do. Data processed using advanced analytics tools is valuable in and of itself – but enriching it with intelligence from across the market allows insurers to prioritize workflows and be alert to potential red flags highlighted elsewhere.

Knowledge is power

Insurers fund and rely on information from the Insurance Fraud Bureau (IFB). The Insurance Fraud Register (IFR), which it manages on behalf of the Association of British Insurers (ABI), is only useful in underwriting decisions and assessing claims if insurers contribute to it. Their intelligence empowers the organization, helping to move cases from suspected to actual fraud and supporting law enforcement.

All this became a lot easier when SAS teamed up with the IFB last year to develop a new platform that brings together the Insurance Fraud Register (IFR) service and the Insurance Fraud Intelligence (IFI) Hub on a single platform. This platform combines data from the IFI Hub (suspected fraud) and the IFR (confirmed fraud) with advanced analytics and will eventually allow users to share, analyze, monitor and investigate cases in real-time, helping to inform and speed up decision-making.

A pivotal fraud platform

Ben Fletcher, Director at IFB and Chief Customer Officer at MIB (Motor Insurance Bureau), who describes the platform as ‘pivotal’ in the fight against fraud says that ‘sharing intelligence is a way for insurers to help identify new and emerging trends and patterns.’

Cracking down on insurance fraud through the central intelligence hub, he says, not only minimizes the financial and human impact on consumers but has industry benefits too:

“We will get better insights and be able to provide better outcomes when we have datasets from the IFR and IFI together. It also makes it far easier for the industry to access that data in one place.”

AI and machine learning are fundamental in the fight against fraud. Insurers benefit from economies of scale, capturing and analyzing large volumes of data using fewer resources – so they may be more inclined to share it. Moreover, since they rely on the hub, they have a vested interest in ensuring the intelligence contained within it is up-to-date. In other words, their collective efforts are more effective than their solo ones.

Find out more about our partnership with the IFB here.


About Author

Daniel Derham

Senior Insurance Account Executive, SAS UK Commercial Key Accounts

Daniel has worked in Insurance technology for over 10 years. The last 5 years of which he has specialized in high performance analytical applications. Since joining SAS in 2019, he now holds executive relationship with some of SAS’ most strategic Insurance customers in the UK and Ireland. Daniel’s passion is to transform the industry for both the insurer and the insured through the use of data, analytics and decisioning.

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