Independent research conducted by Axis Capital Inc. to its group of insurance and reinsurance companies shows gathered data from its head office in Bermuda to its branches in Singapore, Australia, and United Kingdom and in more than 10 states in the United States of America in which 15% of insurance claims are fraudulent. The loss may not be evident immediately after the act is made but accumulated claims in the annual review can reflect the fake report, long enough time for the culprit to spend the money earned.
Across the industry’s chain, agents, insurance companies and agencies, brokers and insurers have the responsibility to prevent fraudulence to happen.
Traditionally, insurance agencies have to hire expensive human resource investigation unit to clear the issues. Since this method has been known to create bigger loss, leading companies developed their own insurance fraud detection system using advanced technology. Automated fraud detection systems were invented which have predictive analysis of possible fraudulent behavior. Data mining techniques have been developed and are being used in leading insurance companies adapted in developed nations.
Moreover, digitization marked by the growing market of mobile users and social media has changed business landscapes including insurance.
Insurance companies are now using digital media not only to protect their business from fraudulence but also get a plethora of information from clients who are victims of scams. Analytics and logistic characteristics of these applications counter the challenges faced by the traditional method of investigators.
These fraud detection systems are not only adapted by developed countries. Despite the lack of budget, many developing nations have developed their own systems and applications. Jakarta, Indonesia and Kuala Lumpur, Malaysia both have invented fraud processing systems which can calculate real time score of fraud alerts, track historical patterns and behavior of existing strategies of scams and integrate fraud alerts to management system and send it to designate teams for each insurance companies. Taiwan has their own systems which use advanced modeling methods to identify exceptions and anomalies and consistently work with data on industry standards and updates. On the other hand, India has developed fraud monitoring framework to all insurance members listed in the council.
Softwares are also installed in systems and operational procedures in every insurance company which require every user to undergo certain protocol. Customer Relations Management (CRM) process is being required of companies where every their business information should be in sync to any social media platforms they have. When social media is integrated, it enables greater transparency between clients and insurance agencies.