Prevent insurance fraud with your data

The Insurance Fraud Bureau has seen a 17% increase in the number of individuals added to the Insurance Fraud Register in 2022 compared to the previous year.

This additional cost is often passed on to honest policyholders through higher premiums, and during a time when both businesses and customers are trying to cut down costs, fraud is an unwelcome expense. Historically, fraud has always been an issue for insurers, however there is a correlation between the current cost-of-living crisis and a rise in insurance fraud globally, with Zurich UK reporting nearly £200,000 worth of fraud being thwarted each day last year. 

To combat fraud, insurers must be able to identify and understand the methods that have been used to commit fraud, both past and present. 41% of insurers polled by FRISS believe the tracking of fraudsters' modus operandi to be their greatest challenge in effectively responding to fraud, however 37% also consider poor internal data quality as a significant challenge.

While data and analytics can contribute to fraud management, data science and data platforms do not create an instant solution to such problems. The quickest way to add value to your business' fraud prevention tactics is to use the business knowledge of SMEs and investigators that they have from previous experiences to identify and collate data. This provides an instant base of expertise to build upon and optimise with the use of data platforms, which can be effectively utilised to build customer profiles and record transactional behaviour based on the bespoke knowledge of your team. An internal approach is an essential foundation in the prevention of fraud within your business, as fraudulent behaviour can be encouraged by operational vulnerabilities. 

The complete eradication of fraudulent behaviour is a futile measure, however prioritising the experience of your honest customers offers more rewarding results. By building intelligence around customers and their transactions, insurers can segment their customers to create differentiated experience with automated processing and increasing satisfaction, which can improve retention rates. Insurers have a responsibility to ensure that fraud prevention measures do not negatively affect the majority of honest customers by making it easier for honest customers to do business and difficult for fraudulent customers. 

The building of fraud analytics can allow you to risk score transactions in real-time, prevent fraud and realise tangible benefits. It is essential to remember that prevention solutions are there to serve your specific business needs, so vendor solutions should be adaptable to your concerns. Businesses may have to consider building and maintaining their own data platforms and analytics due to the inevitability of real-time transactions and fraud prevention. These data platforms can perform specifically to personalised business needs and prove more cost effective than traditional vendors. 

Cloud platforms such as Azure can be used to implement a data platform which is incrementally built with the right tools and components for your business. As your ecosystem grows, more components can be added to suit your business needs and move towards a preventative model, rather than investigative after a fraudulent event has occurred. By viewing real-time data on customer transactions, behaviours can be scored based on data from previous customer transactions to scan for potential fraud. If the risk is low, the customer experience can be seamless and efficient, however if the risk is high, the customer experience can be challenging to deter fraudulent behaviour.