- Where Insurance & Technology Meet

Insurance Fraud in Prime Time

Is it just me or did you also notice the abundance of fraud news stories last year in insurance? It makes me wonder if there’s a TV show in the making; you know “Torn from today’s news stories, names changed to protect the parties” akin to Law & Order or CSI. I can see it now – Canadian Insurance Fraud: Special Investigations Unit (CIF:SIU).

Seriously, when I see headlines like RCMP arrest 4 in interprovincial fraud scheme and Toronto-area police bust 14 fraudsters and FSCO cracks down on fraud as examples of last year’s insurance industry stories, it makes me wonder: Why the increase? After some research and thinking about it, I’ve come up with three main reasons (near as I can tell):

  1. Economy: Insurers today need every penny they can get in this soft economy.  Thus, they can’t afford to lose their margins to fraud. Maybe in the past the cost of chasing and prosecuting fraud was more than the fraud itself. But not anymore.
  2. Legislation: There seems to be an increased focus and new teeth coming to help address fraud and increasing premiums. The prime example from last year was the establishment of Ontario’s Auto Insurance Anti-Fraud Task Force which has produced a number of recommendations that are meant to get tougher on fraud.
  3. Technology: Tools and technology to aid in detecting fraud that were once out of reach to the insurance industry (whether due to cost or complexity) are now more viable. With the advent of the internet, cloud computing, and social networks, the ability to share and collaborate among insurers and agencies has improved (okay I’ll admit that this has also made it easier for fraudsters to work together as well).

It’s this third point that interests me the most (hey I’m an Insurance Industry Architect by trade and also a technology geek at heart). When you consider that today most of us have smartphones that have a million times more memory, and are thousands of times faster and hundreds of times smaller, than the guidance computer used for the Apollo moon missions, it’s easy to see that technology has advanced. Question is then: how best to apply it to finding fraud?

The other thing that strikes me is that like the CSI crime lab, many techniques and tools need to be applied in order to help fight fraud. This is definitely not a one tool approach. Fraud must be attacked across the lifecycle of the claim process (even into underwriting in support of fraud prevention). A variety of tools need to be brought to bear in order to help transform/cleanse the data, to analyze and detect fraud using different techniques such as scoring, visualization, and predictive analytics, and to provide identity insight.

In some cases all your SIU might need is Google. The latest story from ICBC highlighted that the individual who perpetrated the fraud was bragging on his Facebook page about it. But that wouldn’t make for good television viewing, now would it? Maybe as a sitcom.

Editor’s Note:  Gordon Alexander is an Industry Architect, Insurance, with IBM Canada Ltd.  He likely watches too much TV, but will stop long enough to speak at the 2012 Insurance-Canada Technology Conference.