The heavy burden of insurance fraud in South Africa – currently estimated at costing the industry around R10billion annually - could be reduced significantly if the quality of data improved.
That’s the view of IDS Steering Committee chairman Collin Matthee who said that according to the SAICB, an estimated 20percent of insurance claims in South Africa were fraudulent.
To complement the fight against crime, the Insurance Data System (IDS) was established by SAIA and its members in partnership with TransUnion more than a decade ago in an effort to provide for quick and easy verification of previous claims and policies.
The database of personal lines claims policy and vehicle information currently holds over 9million claims and 6million policies submitted by IDS participants – South Africa’s leading insurance companies and underwriters.
Participants submit their policy and claims information, which is matched to existing information. Participants can then make an enquiry to assess the underwriting risk associated with an individual, address and/or vehicle. Similarly, the system can highlight potentially fraudulent elements when claim enquiries are submitted.
However, incomplete or inaccurate data submitted by IDS participants is undermining the quality of the information provided to members.
According to Ian Logan, Senior Director: Insurance & Partners at TransUnion, a recent exercise undertaken by TransUnion to reconcile IDS data on vehicle claim information with TransUnion Auto Information Solutions data received directly from vehicle manufacturers, revealed a significant disconnect.
“Of the 90 000 IDS records examined, around 40 percent were not found on the TransUnion Auto database. This was largely because the information provided by IDS members was incomplete or inaccurate,” Logan said.
Only 22 percent of the IDS members’ records examined included the vehicles’ VIN and engine numbers. These identifiers are essential to ensure a vehicle being enquired about is the vehicle it is purported to be; and, for example, that multiple claims for that vehicle have not been submitted to different insurance companies for the same event.
“To enable a more complete view of policy and claims data, TransUnion has redeveloped the Insurance Data System to make it easier for members to submit data to the IDS as well as wider and easier search criteria. However, IDS participants will also have to drive improvements for data collection, storage and submission within their own operations,” Matthee said.
According to Logan, common areas where data quality is an issue is at quote stage where inaccurate ID numbers and names are captured, as well as incorrect vehicle data. The result often is that insurers are insuring the incorrect vehicles resulting in considerable under collection of premiums, as well as challenges in the identification of a vehicle if stolen.
“Once the industry is more progressive in managing data quality throughout the customer lifecycle, it will assist all insurers to not only identify fraudulent activities, but also to differentiate between good policyholders’ misfortune and high risk policyholders.
“In addition, the recent industry drive towards Treating Customers Fairly (TCF) supports the use of more data at underwriting to ensure that the correct rates are provided – but this has a heavy dependency of the quality of data submitted.
“From our industry engagements, those insurers who collate the most accurate data have the lowest claims ratio’s as they correctly underwrite at inception and have more successful recoveries.”
Having redeveloped the Insurance Data System, TransUnion is embarking on a major drive to ensure industry wide participation to enable a complete view of all personal lines insurance claims and policies. This should be complete by the end of 2014.
Get the latest issue of FAnews