Combating Insurance Fraud with Digital

Insurance carriers, like you, are trying to mitigate fraud, but fraudsters continue to look for ways to exploit the claims process. In this whitepaper, you will gain insights on the two approaches to tackle insurance fraud. A fraudulent case can occur when a claimant tries to get benefits for a policy without any actual losses. Or, the policyholder may violate the principle of ultimate good faith by manipulating the information required for risk assessment and paying a lower premium.

The Common Approach to Combat Fraud – What makes it ineffective?

The most common method to combat fraud is to form rules, checks, and validations. The rules may have certain input parameters and a defined outcome to indicate possible fraudulent activity and alert the claims adjustor. Such rules are incorporated in the IT portion of the claims management system and are managed through hard coding.

For example, input parameters can be the date of loss, date of death, policy status (active/canceled), number of documents required, type of documents, claim amount, bill amount, and others. Based on these input parameters,
the claims adjustor could be sent an alert or the manager could initiate an inquiry. Post-inquiry, if the adjustor is convinced, the claim can be approved and further processing can be initiated.

Sounds simple, right? However, this traditional approach of hard-coded systems has its drawbacks and is not an ideal way for you to keep an eye on fraud. Some of the common limitations of these traditional systems are:

• Error-prone hard coding of rules and validations, causing a few important parameters to be missed
• Increased workload on claim adjustors to check multiple flagged claims
• Complicated maintenance of individual rules, making claims tracking a difficult task
•  Hard-coded rules that require more development time
•  Low quality coding, resulting in failed rule execution, due to which fraudulent claims may go unnoticed

Mitigating Fraud – Insurance Carriers Need to Modernize Processes

Insurers, like you, must leverage the right kind of technology to prevent and detect fraud in a seamless manner. Technologies, such as a business rules management system (BRMS) and predictive analytics, can be used to identify fraudulent activity and prevent it before it even happens. These tools and an increase in the availability of data, can provide real-time insights, empowering you to minimize fraud by leveraging two approaches.