In 2016, there were more than 1,800 fraudulent insurance claims which put strain on insurance fraud investigators’ already strenuous job. According to a report by the State of Insurance Fraud Technology, this figure increased exponentially from 2016 to 2018.
Unfortunately, it takes a long time for an insurance fraud to be proven in court, which is why there’s a saying;
“Insurance fraud is like a disease, and as with any disease prevention is better than cure.”
Here, we will highlight some steps insurance agents can take to prevent insurance fraud, not only against yourselves but against your clients as well.
Preventing Insurance Fraud
1. Formulate A Fraud-Detection Framework & Strategy
The idea behind fraud-detection strategies should be to make a foundational framework out of it which can be implemented company-wide. It could either take the form of an automated software that uses institutional knowledge towards identifying which claims are real or not and manage workflow accordingly. It could also include a full social networking analysis of involved parties.
It’s up to human insurers or insurance fraud investigators to conduct relevant research accordingly, which might include;
- Scoring engines
- Third-party data
- Criminal history, and other tools.
The three steps of insurance fraud investigation should always be followed; i.e., recognition, identification, and investigation of suspicious claims.
2. Know the Likelihood of Insurance Fraud
If you have a limited budget, it is important to know when to dispatch fraud prevention agents and where to focus them. One way of doing that is by conducting area-specific research involving the suspicion and likelihood of fraud. Identify whether criminal or cultural fraud is more common in a certain area and take actions accordingly.
It is important to keep an eye on unclaimed insurance benefits, too, since that’s what identity thieves usually go after. Data analytics can help in this case. Use the ‘suspicion score’ to your advantage here.
By implementing an automated framework and combining it with data analytics, all that remains in terms of fraud prevention is making sure your insurance fraud investigators are on their toes.
3. Reviewing Claims
Any insurance company, be it small or big, must always know which claims to target, at what time, and with what tools. Fortunately, this step can also be automated by implementing predictive modeling and advanced analytics into the mix of your framework.
Or you could continue working on it manually if you’re short on budget but have sufficient manpower.
As you review claims and continue to rescore claims, analyze and revise (if need be) the Suspicion Scores. This will help you prevent fraud by highlighting patterns that you would ordinarily miss.
4. Adopting A Layered Approach & Revising
There’s a reason why you read the term “due diligence” over and over again when on the road to become an insurance agent. Due diligence must also be done when taking steps towards fraud prevention.
No one tool is enough to tackle the ever-changing world of insurance fraud, therefore different and ‘newer’ fraud-detection tools should be created and implemented into your framework from time to time.
This is known as adopting a layered approach – should a fraudster get past one layer, the other shall detect it, allowing you to take preventive measures. These tools must be reviewed and revised as new laws and guidance principles are implemented.
With all that said and done, one of the most important steps insurance companies can take to prevent fraud is be vigilant, be smart, and always be ready. Disaster doesn’t ask before striking, so you shouldn’t wait for it.