Tackling fraud - an industry effort
Measuring insurance fraud is an elusive target. Insurance fraud data thus far is relatively piecemeal, making our understanding of insurance fraud an ongoing work in progress. Insurance companies each gather fraud data in their own way, and data sharing is only now coming to the fore with efforts from the South African Insurance Crime Bureau (SAICB).
Consumer tolerance of insurance fraud has increased in recent years and consumers say that poor service from an insurer is more likely to cause a person to defraud that insurer. More than 76% of consumers say they are more likely to commit insurance fraud during an economic downturn than during normal times. This has created a situation where the insurance industry is seen as a soft target for fraudulent activities.
Two-thirds of consumers believe insurance fraud happens because people believe they can get away with it. The reality is that insurance fraud is on the increase and insurers are battling to find the balance between delivering effectively when it comes to speedy claims settlement and identifying insurance fraud.
Improve your internal processes
The ongoing fight against insurance fraud highlights the importance of strong anti-fraud and claims process measures. Are insurers and brokers on the same page when it comes to insurance fraud?
The short answer is no. Although brokers might disagree and say that they do not support fraud, it is an awkward position for them. It is not always easy for a broker to wear two hats and to tackle fraud head-on with a client when the potential loss of a large commercial account could be under threat.
Due to the lack of service delivery from certain insurers, brokers often want to be involved in the claims processes from day one and would prefer to be part of the process until payment.
Get involved at the crucial stage
Claims management is a critical part of identifying fraud. Brokers do not have rigorous anti-fraud and claims process measures in place and also need to emphasize fraud prevention at application stage.
The first measure will be for brokers to verify proof of discount bonuses and a client’s claims history upfront. The second measure, which is critical in preventing fraud, is the performance of credit and background checks. Brokers do not always have the manpower and systems to implement these measures. Insurers see a direct impact on their results due to this increasing risk and have spent the necessary time and effort to try and identify and curb fraud.
Assisting brokers in the fight
What do we do if the broker wants to get involved? If the broker insists on being part of the process, it will be good to take the following aspect into account:
• We could introduce differential pricing based on the number of anti-fraud checks a broker does upfront.
• Tackling fraud before a policy is issued is of utmost importance and the industry needs to work together to achieve this.
• Part of the solution to stop fraud is to educate and communicate with brokers. Insurers should discuss preventative measures and share fraud trends with brokers.
• Brokers should go to their insurers and ask what they are doing to prevent fraud.
• Insurers should share with brokers what they would consider as red flag indicators.
If we, together, deliver stronger results it will translate into better rates for our customers and more business for the players who have their ducks in a row.
Brokers need to understand the issues affecting insurers at claims stage, and what they can do to help. Along with a desire from those insurers to be involved, an industry wide solution is certainly required. We are not at a point yet where we are maximizing fraud detection, and we should not rest until we get there.
