Five Ways to Effectively Tackle Insurance Fraud

Insurers worldwide face insurance fraud as one of their top challenges. The slow economy has created pricing pressures, but cutting down on Claims payouts is one of the best ways to improve efficiency and reduce cost. Strategically, the success of carriers depends on how they handle their Claims function. For many insurers Claim processing efficiency can be their most important selling point. Insurers can reduce Claim leakages through effective fighting against insurance fraud and a greater focus on recovery management.

This article aims to highlight five important areas when creating a Fraud Management Strategy.

1. Underwriting Prudence

Before the Claim incident is reported, Claims management and Fraud Management begin. During the underwriting process, there are many indicators that could raise suspicion. The Claims data can have a positive impact on the rating and underwriting functions once the Claims have been settled. It is important to include more information in the underwriting decision-making process. Fraud is defeated by responsible data and information use during underwriting analysis.

To avoid fraudulent intent, the organization must be familiar with its potential customers before reviewing any sales proposals. Every application should be carefully scrutinized and verified. It is important to keep in mind the goal of reducing Claim leakages and activate the Fraud Fighting Mechanism as soon as possible.

2. FNOL Management

Effective management of First Notice of Loss is essential for insurance companies from a Fraud standpoint. Insurers can quickly identify Fraud triggers early in the Claims process by streamlining their processes, automating, and improving workflow. Voice Analytics is an early warning system that can help identify Fraud quickly. The Claimant vs. Attorney Vs. anyone other; the time the Claim is reported (Immediate or later); and the method of reporting the Claim are important factors. Delay reporting; and the way Claim is reported can raise suspicions about the authenticity of the loss.

It is possible to have severe consequences if you delay in identifying Fraud triggers. Insurers can lose valuable eyewitness if they delay making an SIU appointment. This can impact the Fraud analysis as well as the recovery options. This stage is costly in the long-term because it will take more time, effort and money than you save. In order to fight Fraud efficiently, insurers must be more efficient and quicker than Fraudsters. Data Analytics is essential to reduce the number of Fraud Claims that can be investigated. Insurers can then focus on Claims with high probabilities of Fraud.

3. Building a Claims Team that is Effective

The overall management of Fraud is dependent on the efficient deployment of resources. If an organization wants to effectively handle Fraud, it must improve its Fraud investigation skills and capabilities. To build a strong SIU unit to handle Fraud, it should hire investigators with solid skills. Investigators who have previously worked with the FBI, Police, and other investigative agencies will bring more value to the table because of their experiences.

Employees should have the resources they need and should be trained. Online education and awareness programs should be provided through an Online Claims Monitor on recent Fraud to Claim handlers, investigators, and others. Claims personnel should encourage Claimants to give feedback as a tool for quality improvement. To ensure that the business perspective is maintained, Claims personnel should have a direct link with underwriters.

Due to the aging baby boomers, and the shortage of skilled resources, there is an increased dependence on IT and automation. Managers should establish a strategy for retaining key employees, regardless of their workload or work-life balance. Without a forward-looking and well-planned resourcing strategy, the organization cannot achieve its goal of limiting Claim leakages and rebuilding investigation capabilities and skills.

4. Technology

Claims Organizations are facing a number of problems. They have been using manual processes and limited technology to manage them. Of all the departments within an insurance company, the Claims Division is often the one that is struggling with poor systems and high maintenance costs. It is important to emphasize the importance of Advanced Technology and Analytics for Fraud management. Insurers should create an integrated Fraud program that takes into account all policy life cycles and has clearly defined Fraud management goals. These goals should be aligned with the business model.

Insurers should consider social network analysis, as the popularity of social media sites is increasing every day. Integration of Claims systems and social networking sites can be a powerful tool in fraud detection. Insurers with higher fraud rates may want to integrate IT systems with other law enforcement agencies, such as the FBI, Interpol, and DMV. Automating the decision-making process using business rules can help streamline and standardize the Claims process.

5. Information sharing

It is often found that different functions within an insurance company do not communicate well with one another. There is an increased need to improve data sharing among different departments, especially Underwriting, Claims, and Finance. Fraud patterns and other issues might exist in other business lines, such as Workers’ Compensation, Commercial Auto, and Crime. It is crucial to have access to different coverage types to identify common behaviors in order to combat Fraud. Companies should work together to maintain Fraud databases in order to have all information in one place. This will help in the analysis and comparison of Fraudulent Claim with other Frauds, and increase the institutional knowledge and capabilities for Fraud management.