European insurers are potentially losing billions of pounds every year from fraud as a result of using outmoded fraud detection techniques, according to analytics software firm SAS.
According to SAS, the gulf is growing between actual and detected fraud. Despite a rise in global fraud, two-thirds of European insurers have seen the volume of detected fraud increase by "less than four percent".
SAS questioned 75 insurance firms across Europe and found that those companies that do not use automated fraud detection, or only use "business rules", saw significantly lower levels of detected fraud than their peers using advanced analytics.
"Outdated techniques and a reliance on manual processes are hampering European insurers when it comes to fraud detection," said David Hartley, director of insurance fraud solutions at SAS. "With undetected insurance fraud costing the UK alone an estimated £2.1 billion every year, proactively tackling fraud can make a real impact to profitability."
The SAS research found that among insurers using business analytics, 57 percent had seen the amount of fraud they detected year-on-year increase by more than 4 percent. In contrast, only 16 percent of those with no solution, or using only a business rules based approach, saw a similar increase.
Almost 20 percent of insurers stated they did not use any technology to assist with fraud detection, relying on a manual review of thousands of claims. In the face of widespread organised fraud, such as "cash for crash" schemes, automation can help to rapidly alert insurers to suspicious claims or networks of claims.
Of the 75 firms questioned, 81 percent said they are using some form of automated detection technologies with 49 percent using advanced analytics.
Insurance firms in Belgium, France, the Netherlands, Portugal, Spain and the UK took part in the research.
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