Menu Close

Insurance fraud is on the rise That’s the consensus of a majority of respondents to a 2013 survey commissioned by FICO. With just a few exceptions, most survey respondents expect most categories of personal lines to experience an increase in fraud losses of 10% to 20% or more in 2012 versus the prior year. A majority of those surveyed, more than 60%, attribute the continued rise in fraud, more than any other factor, to sustained economic hardship in America.

Some 57% of respondents anticipate an increase in personal property fraud by individual policy holders. Around 58% said the same for personal auto insurance fraud, and 69% expect a rise in workers’ compensation fraud.

Only around 11% of respondents view criminal gangs as the number-one factor driving insurance fraud increases. Yet 61% expect to see an increase in auto insurance fraud perpetrated by organized rings, and 55% believe the same for workers’ compensation fraud. This underscores a growing need for solutions that enable insurers to identify organized criminal activity. Some 30% of respondents report that they are already using link analysis in their efforts to detect fraud today, applying predictive analytics to find patterns among different claims that suggest organized activity.

When asked to identify their major priorities in the fight against fraud (from a list of 12 choices), 52.2% cited the detection of fraud in a claim before it is paid, and 39.6% cited adopting or upgrading their fraud analytics capabilities. These two top priorities go hand in hand –predictive analytics offer the most effective and efficient solution for accurately detecting fraud early in the claims process, enabling carriers to sharply limit their losses due to payments against fraudulent claims. About 45% of the survey respondents said they are using predictive analytics for fraud detection in their operations today, compared to around 29% using rules-based systems in an attempt to stop known types of fraud. This is a strong indication that analytics-powered solutions are becoming more widespread, although there is still plenty of room for adoption in the industry. Besides being more efficient and yielding fewer false positives compared to stand-alone, rules-based systems, analytics have the advantage of being able to adapt quickly to new and emerging fraud schemes beyond those already known.

Around 54% of the respondents surveyed employ anti-fraud teams, either centralized or dedicated to specific lines of business. However, only 20% cited the hiring of additional special investigative unit personnel among their major priorities. This suggests that many of the insurers surveyed continue to face headcount constraints, and need to figure out ways that smaller teams can work larger caseloads.