Insurers can now light the shadows where fraudsters lurk

By Waynette Tubbs, Risk & Fraud Insights Editor

The FBI estimates that insurance fraud (non-health insurance) costs more than $40 billion per year. Those costs can be linked in part to the way insurers evaluate claims. Traditionally, insurers have relied on adjusters to flag cases for possible fraud. Some insurers, including CNA and Allianz, now have a higher detection rate because they rely on advanced analytics to automatically analyze claims and flag those that are questionable.

Wear night vision goggles

CNA's Special Investigations Unit Assistant Vice President Tim Wolfe says that even though CNA had trained its adjusters to spot potential fraud, only about 3.7 percent of its claims were being flagged. Since that is considerably below the industry average, the company was suspicious that it was letting some get by. Within two years of its implementation of advanced analytics, CNA saw the ratio of cases flagged for potential fraud rise to 8.1 percent, resulting in recovered or prevented fraudulent claims totaling more $6.4 million.

Allianz also found that analytics use improved fraud detection. Maya Mašková, the head of the Internal Audit Department at Allianz, says, “… analytical models uncover things that the human brain cannot.” In the first six months after implementing advanced analytics for fraud detection, Allianz identified 1,161 insurance fraud cases worth more than CZK 62 million (US$3.1 million). That was 426 fraud cases – and CZK 10 million – more than in the same period of the year before.

Autofocus the lenses

Analytic technology can automatically identify suspicious behavior for investigators. Both CNA and Allianz have automated claims analysis. Claims are automatically prioritized and served up to investigators. Investigators are now more efficient because investigators can focus on cases with the highest probability of fraud or highest potential financial damage.
These two insurers reduced the number of fraudulent claims paid, increased the number of identified fraud cases and improved their operating procedures – that equates to huge savings. But a more important benefit: Fraudsters tend to avoid insurers that can see into their shadowy world.

office criminal

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