Property and casualty insurers must be willing to work together and share best practices in order to fight claims fraud effectively, according to Deloitte's Celia Ramos, principal, and Jim Kinzie, senior manager. The consultants' recently published paper, "A call to action: Identifying strategies to win the war against insurance claims fraud," identified a number of ways that insurers can ramp up their fraud-fighting strategies.
According to Ramos, P&C carriers are taking the problem more seriously, as fraud-related costs are estimated to reach $30 billion this year. But truly curbing claims fraud, she adds, requires a willingness among insurance companies to share data.
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In addition to internal directives to fight fraud, Ramos says, there's also pressure from the public on insurance companies to collaborate and "take a stance to look at fraud, share strategies and advance tactics to address this problem." She adds, "One of the questions most people have is why people aren't sharing this information more proactively. Let's acknowledge that this is an industry problem; let's identify actionable strategies for the entire industry."
Kinzie says the digital nature of data today should make it easier for companies to collaborate. "It's not like 10 or 15 years ago, when a lot of this information was in people's heads or physical files," he explains. "Companies must start sharing information before the point of trial and prosecution."
Getting Hard on 'Soft Fraud'
A growing component of fraud-related losses is so-called "soft fraud." Defined as a claimant exaggerating the value of a legitimate claim or misrepresenting information in an attempt to pay lower premiums, soft fraud accounts for 11 cents to 30 cents of every policy dollar, Deloitte says. While insurers have been very good about banding together to break up big, criminal fraud rings, the area of soft fraud offers the most room for improvement, according to Kinzie. "That's where you find analytics opportunities," he contends. "The organizations that fight fraud, they're ex-police, ex-FBI, ex-military -- they're wired to find criminals. But soft fraud is a much bigger problem."
Citing data from 2008 that indicated that one in five consumers does not have a problem defrauding an insurer using these types of exaggerations, Deloitte says changes in customer interactions can head off these situations before they occur. "Sometimes it's something as simple as asking a claimant to make a recorded statement -- a business process or activity -- that can be a deterrent to soft fraud," Kinzie says. "The bells and whistles tend to get a lot of the attention, but if there isn't a sound business model within the claims adjuster's workflow, it won't matter." .