Losses to fraud in property-casualty are huge: It is estimated that 10% of industry losses ($32 billion) are attributed to fraud and the problem is getting worse with 61% of insurers reporting an increase in the number of suspected frauds (Insurance Networking, 2016). In the past, insurance claims were delegated to claims agents who had to rely on a limited amount of information and on their intuition to solve those cases. However with the appearance of big data analytics new tools became available and are now changing the field of fraud detection drastically.
Tower Watson reported that 26% of insurers used predictive analytics to combat fraud in early 2016. This number is expected to rise to 70% in 2018, a bigger increase than in any other big data application (Insurance Networking, 2016).
Insurance companies possess a large amount of data about their customers, may it be through the claim’s documents or social media accounts available online. By leveraging technologies such as text mining, sentiment analysis, content categorization and social network analysis data is collected, labelled and finally stored for further analysis (Infosys, 2017). Predictive analytics can then generate an alert when a certain claim appears fraudulent. Subsequently a claims agent will check the suspicious claim more precisely and finally decide the final measures to be taken. Finally, frauds that are identified are added to the systems data pool which further strengthens future analytics results.
In the next years insurers with sophisticated data analytics abilities will outperform their peers as they can offer a better customer service through faster claim handling and lower prices due to reduced costs. Insurers like AXA are already heavily investing in this technology (AXA, 2017), however it remains to be seen which companies will assert themselves in this changing environment. The customer will profit from these innovations as well. Better and more precise claims handling means customers will have their claims accepted faster and will not have to deal with too bureaucratic processes anymore.
However utilizing social media profiles will raise moral and legal questions about privacy and user self-determination in regard to their data. Insurance companies have to watch out to not loose their customers trust.
Further readings:
https://www.insurancenexus.com/fraud/role-data-and-analytics-insurance-fraud-detection
https://www.the-digital-insurer.com/wp-content/uploads/2013/12/53-insurance-fraud-detection.pdf
