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Data & Analytics

09:43 PM
Ellen Melchionni, President, New York Alliance Against Insurance Fraud (Albany)
Ellen Melchionni, President, New York Alliance Against Insurance Fraud (Albany)
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Analytics Key to Proactive Detection and Prevention of Fraud

Advancements in technology have made it so that fighting fraud is no longer as closely linked to searching for the proverbial needle in the haystack. The availability of a greater number of tools to insurance companies is changing special investigation units from reactive to proactive organizations.

Ellen Melchionni, New York Alliance Against Insurance FraudAdvancements in technology have made it so that fighting fraud is no longer as closely linked to searching for the proverbial needle in the haystack. The availability of a greater number of tools to insurance companies is changing special investigation units from reactive to proactive organizations.

Industry experts say that companies fully committed to using fraud-fighting technology conduct daily data mining of claims to find red flags that send the claim on a different track where it will receive special scrutiny. One company known for its commitment is Travelers (Hartford), which reports using a myriad of resources that includes:

  • Participant identification processes that cross-check claim participants against a list of those previously investigated for suspicious activity;
  • Developing picture diagrams of methods of operation for criminal fraud rings;
  • Applying statistical algorithms to estimate the probability of fraud in a specific claim based on a known set of past fraudulent claims;
  • Detecting outliers by defining "normal" among a peer group, and then detecting abnormal patterns of repeated behavior or detecting a shift in behavior.
The SIU is now an entity that can respond immediately to instances of fraud because of technology in the field. In the future, insurance companies' ability to handle capacity will continually improve. Legitimate claims will be settled more quickly because suspicious claims that need further scrutiny will be identified and separated even earlier in the process. Many feel it is probable that fraud assessment and crosschecking systems will eventually operate in real time for the most efficient handling of claims possible.

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