Hyundai Marine & Fire Insurance prevents fraudulent auto claims with SAS®

Korea's automobile insurers are getting slammed with fraudulent claims. The country's Financial Supervisory Service reports a one-year increase of 30 percent. Unfortunately, most insurers do not respond effectively – either because they lack enough claims investigators or because they base their predictive models on existing industry statistics.

But not Hyundai Marine & Fire Insurance. Using SAS for fraud detection and prevention, Korea's largest non-life insurer has built a system that prevents claims fraud and improves premium payment processing, thereby protecting its most profitable customers.

"Fraud costs not only the insurance companies, but also the innocent policyholders," explains Chul-Woo Lee, Manager of Hyundai M&F's Investigation Team. "For an insurance company, enforcing the existing fraud prevention system is no less important than creating new profit."

Hyundai M&F's fraud detection system combines business rules based on the experience and knowledge of its investigators with model rules generated from data extracted from various IT systems. The models are applied to insurance claims, delivering results to claims investigators in real time.

The system also monitors the performance of these rules, enabling the company to quickly modify existing rules or generate new ones. The predictive models enhance the process of fraud detection so Hyundai M&F can detect fraudulent claims before they ever get paid.

"It was inconvenient and ill-timed for us to have to investigate every individual accident history and assess the risk information by going on the network data every time," Mr. Lee says. "Our fraud detection system helped us to increase the detection rate by technically securing twice the amount of data than before. And as a result we were able to secure competitiveness in statistical service."

Hyundai M&F's system relies on a three-pronged approach. A fraud pre-detection system helps investigators judge the possibility of fraudulent activities using statistics-based model and business rules, allowing a loss assessment in advance for the filed claim. A post-detection system pinpoints potential fraud in areas where it is hard to detect earlier, such as hospitals, repair shops and individual clients. Lastly, a risk mart generates data for both systems in a separate data warehouse.

The benefits of Hyundai M&F's system include:

• Timely risk assessment.
• Timely payout after selective investigation.
• Better detection and accuracy.
• Easier gathering and maintenance of fraud data.
  

Hyundai M&F also uses SAS to analyze customer complaints. And the insurer is moving toward a consolidated risk management system.

"Fraud and risk management have a lot in common," Mr. Lee explains, "so it's important to have complementing systems."

The results illustrated in this article are specific to the particular situations, business models, data input, and computing environments described herein. Each SAS customer’s experience is unique based on business and technical variables and all statements must be considered non-typical. Actual savings, results, and performance characteristics will vary depending on individual customer configurations and conditions. SAS does not guarantee or represent that every customer will achieve similar results. The only warranties for SAS products and services are those that are set forth in the express warranty statements in the written agreement for such products and services. Nothing herein should be construed as constituting an additional warranty. Customers have shared their successes with SAS as part of an agreed-upon contractual exchange or project success summarization following a successful implementation of SAS software. Brand and product names are trademarks of their respective companies.

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