July 6, 2016 by Canadian Underwriter
One in three fraud mitigation professionals who were not using either external data or analytics-based products for fraud detection and mitigation cited lack of budget as a reason why, LexisNexis Risk Solutions suggested in a report released Wednesday.
LexisNexis Risk Solutions – a unit of RELX Group plc, formerly known as Reed Elsevier – commissioned an online survey in the United States of about 800 fraud mitigation professionals from insurance and five other industries.
“Eighty-two percent of respondents have some direct involvement in fraud mitigation programs, while the remaining respondents have oversight of these programs,” the firm said in a release.
Respondents were asked, on a scale of 1 to 5, to what extent their team relies on external data for fraud detection and mitigation. They were also asked, on a scale of 1 to 5, to what extent their team relies on “analytics-based solutions” for fraud detection and mitigation.
Nearly half (47%) said they rely on external data “very frequently or frequently”, 29% said somewhat frequently and 24% said not at all or a little.
Forty-four per cent said their team depends on “analytics-based solutions” for fraud detection and mitigation “very frequently or frequently,” 29% said somewhat frequently and 24% said not at all or a little.
When respondents at organizations not using external data were asked why, 33% said there was no budget. Multiple responses were allowed. Nearly a third (32%) said “no need/too small an issue,” 21% cited comfort level, 18% cited lack of awareness, 17% cited knowledge, 8% cited training, 4% said they use internal data, 1% cited the need to be able to customize and 6% said “other.”
The margin of error was +/-3 points at the 95% confidence level. In addition to insurance, the survey queried respondents in retail, financial services, healthcare, government and communications.
Respondents who are not using “analytics-based solutions” for fraud detection and mitigation were asked for reasons and to check all that apply. A third (33%) said no budget, 34% said no need/too small an issue, 25% cited lack of awareness, 17% cited knowledge, 16% cited comfort level, 10% cited training, 4% said “difficult to implement into review process,” 2% said they use internal software, 1% “unsure/not sure what covers,” and 3% said “other.”
LexisNexis Risk Solutions said it commissioned the Fraud Mitigation Study “to understand fraud that touches multiple industries. For example, in an insurance investigation, is there evidence that the potential perpetrator also committed benefits fraud or financial fraud, etc.?”
Respondents were asked which fraud schemes their organizations are “highly concerned with.” Multiple responses were allowed. Nearly half (49%) confirmed they were highly concerned with identify theft, 45% identified data/IT hacks or software fraud and 37% identified fraud involving employees.
Of the respondents in the insurance industry, 60% identified claims fraud as a top concern.
Of all respondents, about a third (34%) identified claims fraud, 31% identified misrepresentation/lying on application for services/products, 26% identified collusion or organized fraud activity, 25% identified fraudulent access to benefits and18% identified fraud focussed on seniors.
“Cross-industry fraud is defined by a fraud case where the perpetrator’s activity touches multiple industries and organizations, habitually exploiting system gaps,” LexisNexis Risk Solutions said in a release. “For example, a fraudster might commit claims fraud against an auto insurer and also commit government benefits fraud or banking fraud.”
Nearly half of firms responding to the survey spend more than US$500,000 a year “on fraud mitigation vendors, and over half of the professionals indicate that cross-industry fraud has extreme/high impact on their organizations,” the company added.
Respondents were asked, on a scale of 1 to 5, what value they place on having on-demand access to data about known fraud activities, events, persons or other attributes (address, e-mail, phone number, etc.)
They were asked what value they would place both on data from companies within the industry and from companies and agencies outside of their respective industries.
More than half (57%) said on-demand access to fraud data within their industry would be “very valuable or valuable,” 27% said moderately valuable and 16% said not very or not at all valuable.
Fewer than half (42%) said on-demand access to fraud data from outside their industry would be “very or valuable,” 33% said moderately valuable and 25% said not very or not at all valuable.