Canadian Underwriter

Early action required to combat insurance fraud and “dire” losses: Aite Group

April 8, 2013   by Canadian Underwriter

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Property and casualty insurers in the United States are advised to deploy innovative technologies even earlier in the claims process to combat fraud, notes a report released by Boston-based Aite Group.


“As the industry attempts to keep pace with fraudsters’ varied, ever-shifting tactics, it must deploy more innovative, effective anti-fraud technologies or risk dire losses,” argues The Escalating War on Insurance Fraud: P&C Carriers and Fraudsters Up Their Games.

Aite Group estimates claims fraud in the U.S. P&C industry cost carriers US$61 billion in 2011 and US$64 billion in 2012. It projects those costs will steadily increase: US$69 billion in 2013, US$74 billion in 2014, and $80 billion in 2015.

“P&C carriers are just now beginning to focus their fraud management strategies and investments on solutions that enable fraud detection as early in the claims process as possible, before claims payments are made and valuable investigative opportunities are lost,” notes a statement from Aite Group.

“P&C carriers should revisit and update their enterprise fraud strategies and actively review the many new and more effective solutions in the marketplace,” report author Stephen Applebaum, a senior analyst with Aite Group, recommends in the statement. “Carriers that fail to improve their fraud-detection capabilities will find themselves both attacked by knowledgeable fraudsters and competitively disadvantaged,” Applebaum cautions.

The report is based on Aite interviews, carried out between July 2012 and March 2013, with North American P&C industry stakeholders and industry-fraud prevention organizations. It sizes the cost of fraud, details fraud types and their perpetrators, and describes anti-fraud solutions being developed and deployed.

The report mentions numerous vendors and organizations, including the Insurance Bureau of Canada (IBC), the National Insurance Crime Bureau (NICB) in the U.S. and SAP.

In March, SAP introduced an analytic application to help companies around the world address what the Association of Certified Fraud Examiners has estimated at US$3.5 trillion worth of fraud annually. The analytic application is designed to enable enterprises across industries such as insurance, public sector, banking, health care and utilities to detect, investigate, analyze and prevent irregularities or fraud in “big data” environments, the company notes.

Also last month, NICB reported questionable claims – those member insurance companies referred to the bureau for closer review and investigation based on one or more indicators of possible fraud – reached a new record in 2012. Questionable claims referred to the NICB climbed 26.7% from 91,797 in 2010 to 116,268 in 2012, although the latter represents just 0.2% of all claims processed.

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