by Girish Joshi, Domain Consultant, Insurance Consulting Group, Wipro Technologies
March 2010 – Fraud is becoming a growing challenge for every insurer and it costs every honest policyholder in the form of higher premiums by up to 5% in markets like UK or 13-18% in some of lines of business in the US. Fraud accounts for approximately 10 percent of the property/casualty insurance industry’s incurred losses and loss adjustment expenses. Insurance fraud in the P&C area is estimated to be more than $30 billion per year. Fight against fraud is not only important for financial performance of insurance company but also needed for maintaining its solvency position in today’s current economic conditions.
Fraud detection and prevention strategies of the insurers will play the most crucial role in the current economic conditions to sustain the business agility and to maintain the solvency position in the marketplace. The existing fraud detection and prevention methods of most of the insurers are not adequate enough to combat the constantly evolving and growing amounts of fraud. Currently, insurers operate primarily on a reactive fire fighting mode which normally is limited to the four walls of the Special Investigation units.
Predictive analytics offers a huge opportunity based on simple interpretation of business rules and flexibility to incorporate new rules/red flags and finding its relevance of the same in the overall data spectrum. It can be applied to the entire insurance value chain to predict various aspects such as customer preferences, customer behaviour, customer churn, payment defaults, fraud possibility, claims propensity, litigation and subrogation possibility etc.
Read the article (8 pages).
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Tags: best practices, business intelligence, fraud, Predictive Analytics
