Organized fraud involving multiple linked claims is pervasive and continues to expand. Individual claim and premium fraud continues to affect operating results. Every line of business is affected in ways that can be difficult to understand unless an analytical approach to SIU operation is embraced. Creating an analytical unit can be a daunting task unless the fundamental concepts of the roles and resources needed are defined and adopted by the enterprise.
The SIU industry has evolved due to greater sophistication of fraud schemes and the need to manage increasingly complex investigations. Further, many units have adopted a proactive detection strategy. This is necessary because technology has allowed claims operations to pursue customer-centric processes that increase speed to settlement. Consequently, the speed and volume of information necessary for modern SIU analytical efforts has created a need for analysts with specialized skills. The skill set includes an ability to amass data from disparate sources and shape it into a format that helps identify, analyze, investigate, manage and understand fraud risk.
[Previously from Ruotolo: Fighting Fraud in Real Time]
What individual attributes should a successful SIU analyst have? Many carriers focus only on technical competencies when hiring analysts. All the technical ability in the world isn't going to help if an analyst does not know what he or she is analyzing. An analyst must possess both the technical skills and investigative knowledge to obtain information to detect fraud patterns for investigation. Strategic analysis involves gaining an understanding of enterprise risk dynamics. Tactical analysis takes information already developed and expands on it to provide a complete picture of the activity, new investigative avenues and new schemes. An analyst doesn't simply run reports. A true analyst looks for trends and patterns in the data, distills the meaning of the trends and effectively communicates those findings to others. Some essential analyst competencies to consider include:
1. Domain knowledge. Hire someone with subject-matter expertise in insurance claims and/or underwriting as well as an understanding of patterns linked to fraudulent activity within a book of business. Analysts need to understand the business context of their work.
2. Technical aptitude. A strong analyst should be familiar with the standard tools and techniques used for fraud analysis. However, it's equally important to find someone who is an inquisitive self-starter and isn't afraid to teach herself something new. Technology changes very quickly. Instead of hiring someone because of a specific technical skill (e.g., familiarity with a particular tool or technique), look for analysts with the aptitude for self-directed improvement.
3. Communication skills. The analyst must be able to relay the findings of his analysis in a succinct and easily digestible manner to investigators. Strong verbal and written skills are essential.
4. Influence without authority. Cross-departmental collaboration is key to success in most insurance organizations. An analyst should have the ability to influence others and build consensus.
5. Strategic vision. Look for the ability to understand and present the "big picture" and how it relates to individual investigations. The key here is to find someone who can move seamlessly between the macro and micro views of the data.
6. Creative thinking. The old adage "thinking outside the box" is crucial for this role. The best analysts get excited when they have to solve complex problems.
Beyond hiring analysts with these six qualities, you've got to have the right technology infrastructure in place. You can have the strongest, most knowledgeable analyst in the industry, but without the technology to access and analyze data or the tools present findings, the return on investment is going to be minimal. It is critical to get buy-in from those making the ultimate budgetary and purchasing decision. Claims executives and other departmental leadership teams (IT, underwriting, actuarial, finance and procurement) must understand the business case and commitment needed for the technology purchase. The first things to consider are: Does IT currently have data mining tools that SIU can use? If not, what are the potential uses of analytical software and tools available on the market? Does a phased approach - starting simple and then ramping up technology - make sense? You have to learn how to walk before you run.
Integrating the analytics group into SIU is key. There must be buy-in and understanding from the field SIU operation. SIU leadership has to lead change-management efforts, promote the analytical strategy and support the partnership. Without communication and interaction between the analyst and the investigators, the process will not work effectively. The key is being able to understand each other's role in order to execute a successful game plan, especially in complex investigations. The strategic and tactical analytical focus is a circular process that develops its own momentum once you understand the basic concepts of the role. If you don't already have an analytical team in your SIU, it's time to get one.
About the authors: James Ruotolo is an insurance fraud technologist, thought leader and the principal for insurance fraud solutions at SAS. Connect with him on Twitter. Jim Hulett is an insurance solutions consultant at SAS with more than 20 years of experience in the insurance and fraud investigation sector.