Technology used to combat fraud
continues to improve with the use
of analytics and link analysis, but
investments in these and other
tools remain low as insurers focus
on other challenges.
“The technology is definitely
getting better, but there are still
around 50 percent of insurers
using very basic technology for
fraud detection,” says Dennis Jay,
executive director of the Coalition
Against Insurance Fraud. “Use of
anti-fraud technology increased
The Coalition, in cooperation with technology provider
SAS, recently surveyed insurers on the subject of anti-fraud
Most insurers use packaged software solutions, but Jay
reports approximately one-third of those surveyed use home-
grown technology. Most of those in the latter group are tier
one carriers. A recent shift in that focus has seen large insurers
augment their own technology with some vendor solutions.
Midtier insurers have increased their efforts, but close to
half of that group uses basic technology, according to Jay.
“They are the ones that would benefit the most from going
outside and looking at some of the new solutions that are a bit
more affordable; the off-the-shelf type products,” says Jay.
Those charged with detecting fraud from within insurance
carriers have to fight to get more resources.
“They are not getting the budgets they feel they need, but
the bigger problem is they are not getting the support they need
from the IT department,” he says. “IT doesn’t feel anti-fraud is a
priority compared to what they need to do with claims, under-
writing, and all the masters they have to serve internally.”
Eighty-five percent of the insurers surveyed report budgets
will remain the same or increase in 2015.
“More say their budgets are going up, but don’t think it is
enough to keep up with the technology or the changing patterns
they see with fraud,” he says.
Jay believes the good news is that those who work hard to
fight insurance fraud receive better referrals on suspected fraud
from the tools they use.
Get Away from the Basics
Insurers use more anti-fraud technology today, but additional resources from
IT remains a challenge.
Changes in Suspected Fraud
Over the Past Three Years
Source: Coalition Against Insurance Fraud
K Decreased Slightly
“Insurers brought in so many referrals they didn’t want to
invest in more investigators because they got too many false
positives,” he says. “We’ don’t hear that now. Quality of referrals
was one of the big improvements that came from this study.”
State regulations require insurers to report suspicious fraud,
so every insurer need someone charged with keeping an eye on
things, whether internally or outsourced, explains Jay.
“P&C insurers are in better financial shape today and have
loosened the purse strings so we see more SIUs expanding and
some companies starting bigger and better units than they had
before,” he says. “There always is going to be a problem with
some segments of the industry, but overall it’s getting better.”
Another major step in the fight comes from underwriting
departments, points out Jay. Jay learned they can track people
going online and real-time technology allows underwriters to
discover different variables in the applications to lower premi-
“With some of the organized fraud rings we see patterns
with the same car or address registered under multiple names,”
says Jay. “With the advent of online shopping that type of
fraud is only going to increase. In many states you don’t have
law enforcement looking at that; they only look at claims stuff.
Catching fraud before they buy a policy is going to save the
insurers money in the long run. If you don’t allow a bad policy
to come in the door, you’e not only saving on the underwriting,
but you’re likely to save on claims along the way.” ITA