Nearly a third of North American insurers feel inadequately protected against fraud: FICO poll

Almost a third of surveyed insurers in the United States and Canada report feeling inadequately protected against fraud and well over half expect personal lines insurance fraud losses to increase even more in 2013, note results released Tuesday by California-based FICO.

Responses from 260 insurers surveyed in July are reflected in the Insurance Fraud Survey, notes a statement from FICO, a predictive analytics and decision management software company.

With regard to fraud losses on personal lines, 57% of respondents reported they expect to see an increase in 2013 while only 5% expect to see a decline in dollar fraud losses.

Fully 35% of insurers estimated that insurance fraud costs represent 5% to 10% of their total claims, while 31% said the cost is as high as 20%.

Some regions were of greater concern than others. FICO reports that 42% of surveyed insurers foresee New York, Pennsylvania and New Jersey as being the hardest hit areas for personal lines fraud in the U.S., while in Canada, 42% cited Quebec and 39% pointed to Ontario.

Respondents said they expect the biggest fraud loss increases to hit personal property, workers’ compensation and auto insurance, FICO adds. With regard to fraud by individual policyholders, 58% of polled insurers forecast an increase in personal property fraud, 69% forecast an increase in workers’ compensation fraud, and 56% forecast a rise in personal auto fraud.

While only 11% of insurers blamed the expected growth in fraud on the increasing sophistication of criminal rings, 55% are seeing a rise in workers’ compensation fraud rings, and 61% are seeing a rise in auto fraud rings.

Further, 63% of insurers reported they believe there is increased risk of fraud in no-fault states compared to states with tort systems.

“Insurance claims fraud is big business — and it’s getting bigger. With more people resorting to fraudulent activities, and fraud rings becoming more sophisticated, insurers must step up efforts to protect good customers, uncover organized fraud and improve the effectiveness of specialized investigative units,” Russ Schreiber, vice president of the insurance and healthcare practice at FICO, says in the statement.

Insurers identified some useful ways to fight fraud as including predictive analytics, 20% of respondents; use of anti-fraud teams for specific books of business, 17%; link analysis for detecting fraud, 8%; and business rules for stopping known fraud types, 7%.