Successfully Traversing the Fraud Detection Tightrope
Without proper management of fraud prevention, insurers face an obstacle course of challenges. There are so many regulatory and compliance steps required, it’s the equivalent of traversing the Grand Canyon on a tightrope without a net – during an earthquake.
The main challenges insurers need to tackle in order to manage fraud detection systems are:
- Staying ahead of ever-changing local and international regulations
- Maintaining standards and reducing risks
- Staying compliant and using best practices
- Employing the most comprehensive ID and verification processes
- Identifying risk and protecting customers from fraud
For large insurers, integrating risk and detection tools ensures that customer satisfaction is maintained with the speedy processing of claims and underwriting. Such satisfaction and ease also positively impact employee performance because their processing tasks can be performed quickly, and data is easily available from one source.an Insurers can overcome their fear of falling into the of fraud detection if they embrace a single concept: end-to-end. An end-to-end platform – from underwriting through claims to a Special Investigation Unit () – can close the loop (or virtuous cycle) and enable continuous learning, swiftly and seamlessly. This means creating streamlined strategies that integrate each part of the detection and management of fraud and risk from across an organisation.
Before the advent of fraud detection management, data from risk assessments was siloed by department, which resulted in a disconnect between processes. For example, the claims department had no idea what was happening in underwriting, and vice versa. Digitising and interconnecting those processes provides better service and prevents important risk data from slipping through the cracks. Being connected improves efficiency, boosts customer satisfaction and retention, saves money, and improves employee satisfaction.
AI and digitisation of the insurance chain bring remarkable new potential to insurers and their consumers. But without proper fraud prevention, a window is left just slightly open can enable fraudsters to exploit system gaps. This is a time – unlike any other – in which insurers can expect to see a significant threat from scams. Much uncertainty remains, including digital vulnerabilities, internal data quality issues, ability to use technology without compromising data protection, and privacy and inadequate capabilities of external data sources. With resilient fraudsters trying to exploit any window of opportunity, addressing such threats is important for a carrier’s ability to thrive and grow.
In today’s insuretech ecosystem, success depends on the ability to deeply enable a digital way of working. Exactly how much fraud impacts the industry is hard to pinpoint. When addressed correctly managing fraud risk well can lead to incredible accuracy of detection.
Recognising the advantages and disadvantages of technology is the first step towards boosting efficiency in your claims process. AI-driven fraud detection, in tandem with experienced investigators and anti-fraud efforts, can deliver greater value than ever — to both insurers and policyholders. Leveraging fraud detection systems can help insurers stay ahead where bold and innovative leadership maximises tools and people.
The benefits of implementing fraud detection software include:
- Improved loss ratio
- Better portfolio quality
- Getting ahead of emerging fraud schemes
- Improved investigator efficiency
- Real time detection
Financial institutions and insurers are legally obliged to screen new and existing customers to determine that no business is being done with money launderers, criminals or terrorists.
The standard Know-Your-Customer (KYC) screening by financial institutions has often proven to be unsatisfactory, on top of which it takes a lot of time and money because it is often a manual process. False screenings can lead to high fines, damage to reputation, and in the worst-case scenario, to the cancellation of the license.
Some of the challenges faced by compliance screening include:
- Management buy-in for this obligation
- Coordinating company-wide compliance
- Conducting discreet screenings
- Inefficient use of technology
A sophisticated fraud detection process overcomes challenges in a timely and cost-efficient manner, turning the compliance obligation into a profitable risk analysis. A continuous compliance process ensures you never lag behind changes in screening against sanctions and PEP lists.
In addition to a healthier customer portfolio, this faster service for low risks also increases customer satisfaction when customers receive their settlement sooner.
Automated screening ensures that the screening obligation becomes an opportunity for healthy growth, boosting business value.
Two-thirds of insurers* have focused on digitisation since COVID-19. Nearly half are focused on reducing costs, which points toward automation and the need to use data to improve satisfaction and processes. Integrated data and tools simplify digital systems that connect data and meet the needs of increasingly digitally native consumers and insurers.
Proactive insurers can start taking steps toward a safe digital transformation and use software that fights fraud before it is able to infiltrate. Fraud prevention makes insurance safer and more honest, with fair premiums for everyone across the globe.
To learn more about FRISS’ fraud detection solutions, click here.