With emerging opportunities for insurance carriers to do business digitally, such as instant online quotes, mobile smartphone claims submissions, or online payment and account management, there is also an increased risk for fraud. Banks, retail stores and various credit providers are often in the news for their vulnerability to cybercrime; however, auto insurance carriers are also at risk. Auto insurance carriers manage millions of customers, claims transactions, insurance payments, and handle personally identifiable information (PII), which means implementing strategies and tools to protect against fraud is vital.
Soft fraud, such as customers being dishonest about annual car mileage or where their car is kept, has always been a concern that carriers have tried to address to correctly price policies and manage losses in auto insurance. Today, however, various forms of digital fraud are a growing concern that carriers fear is eating away at their bottom line.
Recent data from the Coalition against Insurance Fraud shows that fraud is on the rise: 61% of auto insurance companies reported that fraudulent claims have increased significantly in the past three years. While the risks from fraud aren't stopping automobile insurance carriers from doing business, it is important for them to consider the balance between consumer experience and protection on and offline, especially when it comes to handling consumer claims and routine policy management. Here are some tips that auto insurance carriers should keep in mind.
Related: When insurance customers lie
Accessing information and services via cell phone is a priority for many customers. (Photo: iStock)
The balance between access and protection
Digital business strategies and technology enhancements should include cultivating closer customer relationships, as consumers expect their communication with insurance companies to be quick, seamless and convenient. To support business growth, a large portion of auto, renters and homeowner insurance carriers, are looking to appeal to their fastest-growing audience: millennials.
Most millennial customers are heavy or solely mobile phone users and tend to show loyalty to technologically progressive carriers, while avoiding carriers that do not provide authentically mobile experiences that perform well and meet their expectations. They want their claims handled quickly, and when needed, to receive their money quickly and easily via mobile means, which can create new and dangerous opportunities for fraudsters to exploit.
Digital fraud prevention tools can use hundreds of data points to fight cybercrime and claims fraud. Carriers should implement these technologies across their systems to help prevent consumer-victim crimes, such as identity theft and stolen claims payments for instance.
Automobile insurance carriers should use online fraud systems that can flag people (and devices) acting as agents who use carriers’ online application systems to sign consumers up for policies that may never be paid in full or may be outside their state. Second, these systems can also determine which prospects are real and which are synthetic identities, which are more likely to be associated with organized crime. Lastly, to identify and block competitors from scraping offers and rates from their websites.
When it comes to striking the balance between consumer experience and protection, the highest reported challenges insurers face to fight fraud are a lack of IT resources and the false positives that many of these systems can produce. According to the audience at a recent insurance seminar, about one-third of the SIU (Special Investigative Unit) directors expect their IT budgets to increase in 2017 and their top reported needs are:
Link and visualization analysis – Link and data visualization tools bring many of the factors together for a claims investigation, including the date, time and location of the claim, the vehicle that is involved, comprehensive view about the claimant and third parties involved, the associated addresses, as well as prior business and personal relationships. Then each point of data is assessed and linked to build a clear picture and bring to light any patterns or unexpected associations.
Social media account data analysis – Social media account analysis can uncover new information or complete a picture regarding a fraudulent claim by layering in information about any relationships, places and assets involved to find possible misrepresentations.
Predictive modeling programs – Predictive analytics enhances the use of big data, by referencing back historical patterns of fraud and then scoring all new claims. The claims that fit the profile for fraud are flagged and prioritized, so the carrier's investigative team can take a closer look before proceeding, meanwhile allowing low risk claims to be promptly paid for higher customer satisfaction.
With more information available via auto technology, insurers can better triage their claims. (Photo: Shutterstock)
Filling the gaps
Most auto insurers leverage some external data in their claims process, starting with the first notice of loss (FNOL). However, by using only limited data such as prior claims, fraud may be slipping through the cracks in the FNOL system. The personnel trained to investigate fraud — SIU investigators — are dependent on claims triaging systems and adjusters to receive case referrals. In the absence of robust analytics at point of claim, referrals are often made based on the gut instincts or personal experience the adjuster — a subjective and often unreliable process that depends on adjusters’ levels of experience, their vigilance and even their individual case load.
With the breadth and depth of data now available, claims departments can reinvent their claims triaging process. With timely access to current and historical data related to the claims, carriers can apply the latest generation of analytics that goes beyond just prior lessons learned and gut instincts.
The types of data that assist in the fight against claims fraud include having access to synthetic or fraud-related identity information, relationships, vehicle sightings, criminal information, NICB alerts and law enforcement intelligence. Next, the use of the Department of Health and Human Services (DHHS) exclusion list, public records and contributory claims and coverage data (both current and historic) public records, bankruptcy/liens and judgements, and consumer info such as address, moving violations and vehicle registration.
Finally, using big data applications to manage the volume of incoming claims ensures that your valuable time and investigative resources are focused on the right claims while not delaying the payment of low risk claims.
Technology allows insurers to expedite the claims process for policyholders. (Photo: Shutterstock)
Tactics for changing the claims process:
Faster claimant identification, with address and phone number verification for faster turnaround.
Inclusion of any fraud alerts or risk score from the initial policy quote and bind process that can be reviewed in conjunction with any early or suspicious claims.
Evaluate and score the digital profile data associated with any online claims submission.
Prefill standard information for claims operations so claims can be better triaged and assigned to the most efficient and effective claim handlers, and then provide them easy access to additional data as needed — right at their fingertips.
Claims that can immediately be identified as meritorious are to be fast-tracked through the system to prompt payment.
Complex or potentially questionable claims are sent to experienced adjusters or referred to SIU who have data visualization tools to see beyond the provided data to identify underlying relationships and suspicious linkages.
Customers desire a claims process that is painless and straightforward, and of course, they want their claims to be resolved and paid quickly. In fact, according to J.D. Power's Claims Satisfaction Study, cycle time is the leading factor in influencing customer satisfaction and customer retention. The more streamlined the process, the more positive the experience for the customer, and most often, the best financial results.
What lies ahead
Fraud shows no signs of slowing down even as insurance carriers engage customers online and through new, expanding mobile and digital strategies. Yet it does not have to cripple auto insurance carriers who take a combination of business process changes with anti-fraud tools to provide a smooth customer experience while providing greater control to their internal decision-making and workflows.
Lisa Volmar (firstname.lastname@example.org) is the senior director of product development for TransUnion's Insurance Solutions. Volmar has 30 years of experience in building advanced technological solutions and global businesses to deliver products and services to businesses and consumers.