GENERAL INSURANCE COMPANIES NEED TO PRIORITISE FRAUD DETECTION TO AVOID SPIRALLING INDEMNITY COSTS
Mastek, the global IT solutions specialist for the insurance sectorhas issued a strong call-to-action for those involved in the quoting, underwriting or handling of claims in general insurance to form part of the frontline in the fight against claims leakage. Mastek has warned that general insurance market is saturated and comparison sites are forcing providers to compete on a price basis alone. However, as greater competition drives premiums down, the total spending on claims indemnity is rising and cutting into profit margins.
Mastek believes that low levels of digital maturity across the insurance industry are leading to increasing levels of retail fraud and driving spend on claims indemnity to record-levels. Genuine claims are frequently inflated by consumers in order to increase the value of a payout, with instances of fraudulent general insurance claims going undetected and costing the industry £2.1 billion a year according to the latest figures from the Insurance Fraud Bureau.
With claims indemnity quickly becoming the largest component of an insurer’s expense base, policy providers need to invest in scalable platforms that combine multiple distribution channels to reduce claims leakage. The huge amount of data available across different channels means that insurance providers can gather a holistic view of customer behavior in real-time and identify those with a higher propensity to commit fraud. For example, monitoring the number of changes being made to an online quotation or partnering with credit reference agencies can help providers identify high-risk consumers and charge higher premiums where necessary. Alternatively, analysing pictures on social media sites or looking at geographical factors could confirm if individuals are embellishing claims to receive higher payouts.
Vinay Nagwekar, principal consultant for insurance at Mastek explains further: “Detecting fraudulent insurance cases is a growing problem. According to Experian, the insurance industry has experienced a consecutive increase in levels of fraud for the past three years with 17 cases detected in every 10,000 applications. However, we anticipate that the number of fraudulent cases is actually much higher, with the vast majority going undetected.”
Vinay continues: “Detecting instances of fraudulent claims will continue to become more and more important in a saturated market which is demanding insurance providers to reduce premiums. In order to remain competitive, the explosion of information available needs to be harnessed to help providers better manage the claims process and reduce leakage from fraud in the claims lifecycle.”