At this day and age when cyber crime is prevalent, a recent report by an industry analyst firm suggests that firms should reassess their fraud protection strategy.
Ovum recently released its research about fraud in the insurance industry. In a report titled “Ovum: Tackling Insurance Fraud,” the company noted that some insurance companies have taken a piecemeal approach to combatting fraud.
Instead of the piecemeal approach, Ovum urges insurance companies to reassess their fraud strategy as there are already numerous technologies available in the market to help them battle fraud. Some of the technologies include link analysis, text mining, and predictive analytics. Ovum added that these technologies are now “adaptive,” enabling insurers to detect and respond to new and constantly evolving techniques used by fraud criminals.
“New approaches are addressing the growing threat from professional fraud networks,” says Charles Juniper, principal analyst, insurance technology, Ovum. “To date most insurers have focused their fraud strategies on the claims process. In order to avoid organised criminal fraud, the effectiveness of a fraud strategy can be significantly enhanced by using technology across the entire insurance product lifecycle.
While reviewing their fraud prevention strategies, Ovum also urged insurers to study customer contact points, such as policy application, underwriting and claim notification, to ensure the fraud systems they adopt are effective.
Even with these recommendations, Ovum is well aware that combatting fraud is not an easy task for insurers. Among the challenges faced by insurers are increased pressure on profitability and intense competition. Then there’s also the increasing threats from criminal fraud networks, a challenge which, Ovum said “insurers must urgently tackle”.
Ovum cited a report by the UK Insurance Fraud Bureau, which estimates that property and casualty (P&C) insurance fraud costs US$3 billion a year. On the average, 10 to 20 percent of insurance claims are fraudulent.
Despite these challenges and technologies, Ovum noted that there’s no “single bullet” technology to combat insurance fraud.
“Insurers should therefore use a range of technologies within an integrated system as part of a comprehensive strategy to tackle fraud. The increasing pressure to respond to the fraud threat, together with the need to reduce costs and offer a competitive proposition in difficult market conditions, means insurers will invest significantly in these emerging fraud technologies over the next 36 months,” said Juniper.
Ovum reiterated that insurance fraud is a “growing problem” that should be an “urgent priority” to insurers.
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