Staying Ahead of Insurance Fraud in Times of Crisis

Dean Richardson: Hello! Welcome to the Sapiens Insurance 360 podcast. I’m your host, Dean Richardson, Sales Director here at Sapiens. And I’m so glad you’re out there listening! This is where we discuss the latest news, trends, and issues from across the insurance industry and wider technology spectrum.

Have you ever wondered how recent catastrophic events, such as floods or fires, have affected the trust consumers have in insurance? I think we can all agree that trust is the cornerstone of insurance. Insurers have one main job or role in society. If an insured suffers a loss, damaged car, flooded house, stolen belongings, they expect you, the insurer, to pay out. Returning them to the position that they were in prior to suffering the loss. This is what customers pay for along with peace of mind.

And they trust that you, the insurer, will pay out when they file legitimate claims. Some call this relationship honest insurance. But what happens when insurers face a surge in claims and fraudsters start taking advantage of industry challenges to prey upon insurers and policyholders alike? To discuss this important and very timely subject, “Staying Ahead of Insurance Fraud in Times of Crisis,” with us today is Christian van Leeuwen, Chief Strategy Officer and Co-Founder of FRISS. FRISS is one of the leading insurtech SaaS vendors and the industry’s first provider of the trust automation platform that helps P&C insurers support their trustworthy customers but also prevent and detect fraud. As a Chief Strategy Officer, Christian’s responsible for driving growth and innovation through the insurance industry, using the first AI-powered trust automation platform. And with over 25 years [of] experience in the insurance market, Christian has developed a deep understanding of the challenges and opportunities insurers are facing in digitalization and preventing fraud. Christian, welcome to the program!

Christian van Leeuwen: Thanks so much, Dean. I’m really happy to be here!

Dean Richardson: Great. So let’s start, shall we? So, the immediate question: how can insurers proactively detect and stop fraud whilst maintaining a smooth claims process?

Christian van Leeuwen: Yeah. Just let me start by explaining, of course, that more than 90, 95% of the customers for insurance are genuine customers. You want to instantly trust those customers when they file a claim. And if we look at how can insurers then

proactively, detect and prevent fraud during the claims processing, it’s all about automation. So making sure that in real time, at every event during that claims process, that claim gets evaluated, screened, any anomalies or outliers are detected, and that they raise an alert for the claims adjuster or the special investigator’s review. One other thing is, that’s really important that these real-time events are tied into the core system. So integrated into Sapiens, in the Idit suite, for instance. Therefore, it is fed back into the event that the user can make the decision at the point in time where it’s needed. And the other thing which [is] really vital in maintaining a smooth claims processing is also that it’s end-to-end supported. That means that whenever a claim gets to special investigation, it is investigated and they are able to prove it, that it’s fed back into the system, and that, that bad actor or that provider or whatever person or object was involved, that also gets flagged with another claim and the process immediately, proactively stops new fraud or another exposure for fraud happening and even out the underwriting side of it. So that is the end-to-end setup where in talking about proactively detecting and stopping, that is, really vital to do.

Dean Richardson: Thanks for that, Christian, and great to hear. 95% of customers are genuine, but can you explain how fraudsters are taking advantage of insurers who are under an ever-increasing pressure to process claims quickly?

Christian van Leeuwen: Yeah, and then of course, processing claims quickly is also what customers expect. So that pressure is full on. And even when there’s a catastrophe or like a flood or a fire, claims loads will spike and even more pressure is on, on the claims analyst to process it quickly. And whenever that happens, we typically see a surge of two types of fraud in there. So on the one hand side, it’s opportunistic fraud. And then the other side is organized crime. So if you look at opportunistic fraud, it’s more or less the insured that tries to use the event to, they may really have a claim, right? Or they may stage a claim that they also have a claim, but usually they have a claim and they want to get more money from the insurer. So they make up a lot of maybe valuable objects, expensive objects that have also got lost, stolen or damaged by the event and therefore that, that is sort of they blow it up. And on the organized crime, they typically pick up such an event as a, as a trigger to start going door by door and trying to get the insurer to also have them file a claim on their behalf. And they try to really use those the events to, to get more money and to work together on the, on these fraud cases and the insurers, they typically need to respond fast on these cat events. So they might lower that threshold to, to be able to process all the claims. And that’s where we can help the insurers either by lowering the threshold to having it not block their process, but really at the same time, keep on checking all of the actors and the providers and all of the fraud scenarios that might occur. So having them, having [a] really close look into those and making sure that none of these frauds actually do happen.

So that, that is a bit of the time sensitive in helping them process quickly, but at the same time, using automation and being able to show that nothing of these frauds actually do happen.

Dean Richardson: It’s really interesting, Christian. So to pivot slightly, can you provide some real-world examples of post-disaster fraud cases and what the impact is on an insurer’s bottom line?

Christian van Leeuwen: Yeah, these post-fraud cases. Often the big ones, they are the organized crime. Organized crime, they’re the providers, they work together and they go to the insurer. Then they often also work together with the insurers to stage these claims together. And then these organized fraud banks, for example, there has been a couple of years back, there was this Operation Rubicon that is, that’s also public knowledge. So it’s a, you can find it on the internet as well. It’s a, I believe, it’s about $1 million fraud thing. So we’re finding a claim adjuster firm that’s working together with a lot of insureds. And they, they just involve them in the scheme and they file a claim. Get money and not paying for fixing a claim or damage because that is not there, but they just use that money to get it off of the insurance company. And the insurer then gets the innovation done and the provider can do the work. And, and they also stick money in their own pockets, of course. And these fraud rings, they can go to, up to, I’ve seen fraud rings of up to 16,000,000 in one single forgery. Then there might even be bigger ones. Right. So these are really hitting the bottom line of insurers. Of course, still, the opportunistic fraud if you add these up. Right. This also talks about millions of dollars and euros that that are impacting the bottom line. And these two together. Yeah, it’s really makes sense to block it. But ultimately you can lower your premiums for the genuine customers. Right. That is all of the what the reasoning is behind this. And making sure that you don’t accept fraud.

Dean Richardson: Absolutely. So it’s, it’s a huge industry problem. So, Christian, so here’s a key, key question for all of our listeners. So why and how can insurers be proactive rather than reactive in their fraud strategies?

Christian van Leeuwen: And I think that was a very good question. And I think I want to break it down into two pieces like the why as you said. So why does it make sense to be proactive? Ultimately, the money’s gone, right? So if, if you file a claim and you have an STP process with nowadays, with an instant payment, it’s not uncommon in Insurance. So the money’s gone and you have to try to get the money back. Or if you detect it and you need to get your money back, you need to investigate that claim. A lot of effort is needed to investigate that. So it’s always better to try to prevent this than later trying to detect it and investigate, you have to prove it. You have to go to court. And, and the example of the fraud ring that I just mentioned, I believe that that took years to settle in court, right? So these are really cumbersome processes. It takes a lot of them. And I think even there, the insurers are more like the moving into where the banks also work. And so they really want to be proactive, blocked whenever there’s exposure to prevent more leakage of the money. In terms of how, well, how can it be proactive ties a bit back on what the what we said in the beginning, right? It’s all about thinking about this in real time, making sure that you are at the event indeed at the first note of loss. Check what with the data that you have available, what and external data bring that in the mix, post it to our models, making sure that you find this relationship in our network in real time. And then look at that point in time, making sure that [it is] end-to-end connected, so that you can also use that at underwriting to prevent these bad actors from coming into your book of business. And there we see insurers more moving to an intelligence center where also intelligence with police and other industry fraud bureaus or the national fraud bureaus are shared. You also want to load this into, your environment to be able to check if you have exposures with these, these bad actors, or maybe fake shell companies that are going around in setting up fake policies and finding claims on those. So these are, these are the things that we see happening where insurers are becoming more proactive and need to be more proactive, because these things happen across all the channels, the broker channels, the online channels, of course, all lines of business. So fraudsters do not distinguish between those things. They’re just simply out for the money.

Dean Richardson: Yeah, but Christian great to hear that you you’re stopping or identifying and stopping fraud not only at the point of claim, but at the point of underwriting as well. So, you know, as you say, stopping those bad actors, coming through the front door as well. Okay. So, Christian, just to wrap things up, I know there’s a lot going on with deep fakes at the moment, and especially with the recent new ChatGPT version. So what’s your advice to insurers on how to deal with this threat?

Christian van Leeuwen: Yes, absolutely. The thing explodes right now right in the ChatGPT since the launch [I] get a lot of requests, am I dealing with the deep fake? How do I know and what’s happened here? So to start off, I think we need to distinguish between two things. We have what we call shallow fakes, and we have deep fakes and shallow fakes, [are] more or less an image or a picture of your living room where people have planted expensive objects in there, to also make sure that they can file that under the insurance. So it’s an existing damage, an existing living room, and therefore, they add these things to it and it’s full, deep fake is for instance, a, an invoice. A fake invoice is completely fake, never been issued by a company. And the first thing to do actually is to start checking these deep fakes that are in the photo, and we even have that as part of the SwissRe platform to check for deep fakes and to get in this protection set up in in your process. Because you don’t know currently as an insurer if you, how big this problem is for you. So you really need to start there. And from that deep fake, deep fake checks, also start getting the data from the invoices and making sure that you double check what’s in there. So a three, full 360 check needs to be done on that. So that provider on there, is that a real provider? Is it actually located at that address? Those are vital things to start doing. The second is to really control your own communication. So that’s my advice to most insurers here as well, because deep fakes are there. It’s so rapidly changing that, and we are, we are keeping up right with that. But the new, we don’t know like what in like six months is possible with this technology a lot can be possible. So the second is to control your own communication, to make sure that you control how customers are sending in documents, how customers are sending in images. You want to verify that it’s your customer that sends in these images. So a lot is possible there as well, and I would just simply advise those two things to, for insurers to start looking into and setting up these basic checks. I know it’s a full podcast and so on, and I know we’re out of time, so I do want to like advise everybody, if you want to know more, reach out to Sapiens or to FRISS, and we can help you set this up.

Dean Richardson: Christian, thank you so much for your thoughts today and appearing on this show. I’ve learned something new. The difference between shallow fake and deep fakes. Thank you for that. Yeah, unfortunately, natural disasters and fraud are inevitable in today’s world. But savvy insurers with advanced insurertech can stay one step ahead of the bad guys or the bad actors as you say. To our listeners, as always, we love hearing from you, so if you have any comments or would like to follow us on social media, please do reach out to us across the various channels. And as always, don’t forget to subscribe to our podcast. We’ve got so much more coming, so stay tuned for our next edition of Sapiens Insurance 360 podcast and goodbye for now!