In the war on fraud, the bad news just keeps coming. In a new study published by Aite Group, total fraud losses for the property/casualty insurance industry are estimated at an eye-popping $64 billion. There’s more: The study predicts that fraud losses will climb to $80 billion by 2015. Of the $64 billion total for 2012, private passenger auto takes the greatest hit, with losses of $26 billion. The analysis comes on the heels of a recent NICB study that shows questionable claims — meaning claims referred for fraud investigation — increased by 26 percent in 2012, the fifth straight year of increases.
For too long, insurers have focused their antifraud resources on the claims side. According to a recent survey published by the Coalition Against Insurance Fraud, 88 percent of survey respondents say they are using antifraud technology. However, the majority of those companies are employing antifraud technology as part of the claims process and not in other areas, such as underwriting. The conventional strategy of investigating fraud at the time of claim may be like closing the barn door after the horse has bolted. By the time an insurer has identified a claim as involving possible fraud, the carrier has already invested heavily and probably lost, no matter the outcome of the investigation. One thing becomes clear in reviewing the literature on insurance fraud: To win, insurers must broaden their fraud detection efforts from the rear-guard actions of claims investigation to the front lines of underwriting.
Advances in technology make that possible. The availability of vast online databases and predictive modeling to identify sophisticated patterns of behavior enables insurers for the first time to detect fraud even before issuing a policy. That’s good news for carriers, because the nature of buying auto insurance has fundamentally changed. The majority of consumers now use the Internet when shopping for auto insurance. That means carriers have only a matter of seconds or minutes to size up the risk and ferret out any inaccuracies or inconsistencies. According to Stephen Applebaum, the Aite study’s author, “Carriers that fail to improve their fraud-detection capabilities will find themselves both attacked by knowledgeable fraudsters and competitively disadvantaged.”
Verisk Insurance Solutions – Underwriting is doing its part to ensure that carriers are well armed on the underwriting front. Products such as RISK:check® Point of Sale provides insurers with real-time, accurate data so they can make smarter decisions at the point of sale to find and stop fraud before it starts.
Read more about Verisk’s RISK:check Point of Sale, or call 1-800-888-4476 to speak to a sales representative today.