5 Fraud Detection Challenges Insurers Face

5 Fraud Detection Challenges Insurers Face

Fraud has existed throughout time in different types and methods. However, as fraud methods change, so do the challenges you need to tackle. This blog post looks at 5 fraud detection challenges insurers face and how Legentic is the best solution for your to uncover fraud and fight financial crime.

1. Fraudulent fractions with a high cost

According to FRISS, around 18% of claims contain fraudulent elements. Meaning that claims are not always entirely fraudulent, but those small fractions take a heavy toll on the insurance industry. The UK insurance companies alone average £2.1bln on fraudulent claims annually.

Even though most insurance customers have no fraudulent intentions, this costs the average consumer over £50 in premium payments. So, a small fraudulent group would cause direct damage to the insurance company, and in turn, to the average consumer, driving prices higher and delaying claim payments.

But if fraud is causing harm to both the insurers and the insured, why do insurance companies not focus on anti-fraud efforts and investigations?

2. Time-consuming claims investigation and Overloaded fraud investigators

The solution seems easy, hire enough people to process and investigate fraudulent claims. However, it can be rather challenging for insurance companies to deal with the amount of potentially fraudulent claims manually.

The journey starts with the insurance company being able to identify potentially fraudulent claims, investigating the real-time behavior with no easy way to trace the historical behavior of the policyholder or the insured asset, and most importantly, filtering low-quality data and using complicated, not user-friendly technology along the process.

But what are false positives, and how do they affect your customer experience?

3. False fraud positives and low-quality data

According to FRISS's Insurance Fraud Report, the biggest challenge for technology in detecting fraud is false positives (56%). A false positive in fraud is when a legitimate claim is flagged as fraudulent. False-positive could vary between 10% to 50% based on asset insured, insurance type, policy, and location.

The low-data quality is another challenge insurers face daily. Searching through low-quality data is time-consuming and could also lead to more complex identifying false positives and could have an immediate impact on the insurance claim and the policyholder’s experience and financial reputation.

4. Change of fraud patterns

It’s not only the insurtech and fraud detection industry that is shifting to new and innovative solutions and technologies, but the fraudsters have also been adapting. Like every other crime, criminals are always looking for new ways and opportunities to embezzle and/or claim fraudulent policies.

The change of pattern creates a major obstacle to claim departments, as it does not only affect the current claim but also previous and future claims, forcing the investigators to be on the look and go through previous cases.

5. Dissatisfied policyholders

This lengthy and complicated hands-on approach is not only financially expensive but limits your company from properly allocating talents and resources. It also causes massive customer dissatisfaction due to false positives, investigations, and late claim payments.

According to FRISS, false positives are the second biggest challenge to insurers, with a whopping 48% of surveyed insurance employees saying that too many false positives are a major workload and exhaustion factor.

Legentic

With all these challenges, fraud is becoming ever harder as time passes by. However, technology is still ahead of the fraudsters and would give your company a major advantage against financial crime.

Legentic offers a genuinely unique and innovative solution focused on validation, recovery of assets, and the exposure of fraud. We collect big data from multiple sources all over the world, enriched through AI and machine learning, and convert it into easily accessible, understandable – and actionable information.

Legentic's Mohawk

One of Legentic’s products Mohawk is a platform of publicly inaccessible data to detect and prevent fraud and financial crime. Our platform gives access to billions of archived ads in over 22 countries. Search using the phone number, username, email, plate number, or text. Mohawk's data is no longer publicly accessible and shows you the digital historical behavior.

Through Legentic’s Mohawk platform, you can:

  • Uncover fraudulent claims

  • Access to billions of archived ads across 22+ countries

  • View real-time and historical data

  • Assess insurance applicant risk

  • Track the digital behavior of the policyholders

  • Assess the risk client based on historical online behavior

  • Confirm or refute your "hunch"

  • Limit false positives

  • Reduce policyholder claim time

Our customers include insurance companies, loss adjusters, private investigators, financial institutions, law enforcement, attorneys, banks, and government institutions. The service is ready for immediate implementation, is legally data protection compliant, and will deliver a significant return on investment versus monthly service cost.

Want to learn more about how Legentic’s Mohawk or Sjerlok can help you overcome the above challenges and more? Contact us today and book your live demo!