New markets, new products, and new underwriting practices bring new revenue. And then what? Following the near-term benefits, claims start to come in. Many, of course, are meritorious, but some are not. Whether you’re dealing with new policies or old, that’s the enduring threat to all carrier revenue. While existing insurance programs may have infrastructure, expectations, and expertise when it comes to claims fraud, new insurance products may not, and carriers must prepare themselves for the obligations —and challenges — that follow.
Claims happen. Insurers know that. They prepare for claims and make every effort to pay meritorious claims as quickly as possible. With existing products and markets, the industry has had the benefit of time. But with new products and markets, you may not have that kind of expertise, resulting in a considerable amount of risk. While the new product development process includes claims forecasting exercises, the processes for identifying and investigating fraud may not be proven — a problem that could imperil product profitability down the road.
When your company is exploring new revenue opportunities, such as new products and markets, think about:
- what is likely to indicate suspicious activity
- how you can package these fraud indicators for faster and easier use by claim handlers
- how fraudsters will modify their practices to exploit your new product or market
- what the constraints on existing investigative techniques and resources are
- the extent to which a claimant’s history affects suspicion around claims for your new product or market
- how you can use existing tools (such as ISO ClaimSearch®) to increase speed to detection and appropriate handling
There are two sides to the combined ratio, and new revenue affects only one of them. The claims department needs to think about the other as well, staying ahead of fraudsters to make sure new growth is profitable.