6 Steps How to prevent Insurance Fraud
Insurance fraud is the biggest issue in the insurance industry nowadays. It is not only costing billions of dollars per year to insurance companies throughout the globe, but it also destroys the whole business sometimes. Some people make fraudulent claims to the insurance companies and get the money with documentation tempering. If insurance company owners want to run their business without any fraud claims, they have to take a proactive stance against fraud. In this article, we are going to tell you a whole process of preventing insurance fraud in the form of 6 steps.
1. Implementation of Fundamental Framework:
To avoid fraud claims, the insurance companies must have a fraud-detection strategy. But there is a problem in the implementation of the fundamental framework, the fraud-detection strategy will slow down the complaint and claim processing rate. So, there are some questions in front of the insurance company owners, for example, how can we check claims for fraud but ensure fast claim processing? How can we detect that a claim is a fraud before paying it? The answer simple, being an insurance company owner, you have to establish such a fundamental framework, which can detect insurance fraud without even slowing down the claim processing processes. The management of such a fundamental framework should be so strong, that it can efficiently detect fraud claims by adopting fraud efficiency investigations.
A fundamental framework is an “out-of-the-box” solution for the detection of fraud claims and their reduction in the future. By using the fundamental framework, you can make a culture in your company staff in which they will check, recognize, and investigate every suspicious claims. So, a fundamental framework is like a backbone for your insurance company and if you want to save your insurance company from fraud claims, you have to adopt it.
2. Know the Relative Level of Fraud potential:
According to some researches, there are certain types of claims which are easily susceptible to fraud. These claims are known as Fraud Potential claims. Knowing about these types of claims and relative levels of fraud potential allows the best and quickest way of minimizing the chances of fraud. It will also enhance the efficiency of your company’s SIU (Special Investigation Unit). It is very necessary that your investigation focus should be on these types of claims which have high fraud potential. For your ease, we are describing an example of such kinds of claims. For example, an insurance policyholder filed a theft claim involving the suspicious disappearance of high valued and expensive jewelry. Of course, this claim has a higher potential of fraud because there are many chances that the policyholder possibly involves in stealing of the jewelry and now, he/she is making fraud claim. Deliberately destroying property is another type of high potential fraud claim. So be aware and investigate these kinds of claims before paying them.
3. Using Data Analytics is the best strategy to detect and avoid insurance frauds:
Insurance fraud comes in all shapes and sizes. As a rule, insurance fraud can be separated into two classifications: criminal fraud, which is executed by experts constantly attempting to drain the framework; and cultural fraud, which is a certifiable inquirer being artful or overstating a case. Information examination can be applied to recognize fraud. By breaking down past fraud, insurance company owner can utilize prescient displaying to deliver what is known as a “Doubt Score,” an incentive for the affinity of fraud. The cycle works this way: Adjusters just enter information, and cases are consequently given a Suspicion Score to show the probability that fraud has happened. The innovation behind this includes using information mining instruments and applying quantitative examination.
4. Insurance fraud can be prevented by continually review and rescore claims:
It is another step to prevent insurance fraud. You have to plan and use your arsenal tools to combat insurance fraud. Data analytics and predictive modeling are two of your most strong and reliable weapons against fraud. You should continually review all the claims by using both these weapons for finding the potential of fraud in different claims. Believe us, by following this step, 50% of fraud can be prevented. The policy is simple to fight the insurance fraud, target the right claim (which has a fraud potential), at the right time, with the right tool.
Suspicion Scores are really helpful in identifying the fraud claims and the insurer can easily detect patterns that reveal fraud.
5. Use “Layered Approach” to detect and prevent insurance fraud:
Layered Approach is a process in IT (Information Technology) in which different tools are used to detect or prevent a problem. In the same way, you can use the Layered Approach to tackle the insurance fraud problem. In the Layered Approach for insurance fraud detection, you will use different tools in a well-organized and synchronized fashion. Remember, Insurance Fraud is really a complex or multifaced problem. So, you have to think in the same way as a criminal think. So, it is our suggestion to you that outside expertise can formulate, plan, and implement the framework to detect and prevent insurance fraud.
6. Beware of different market changes:
As we have discussed earlier, the criminals who commit insurance fraud crimes are really skillful and resourceful. They can easily get benefit from changing conditions of the insurance market. So, keeping an eye on changing conditions of the market is really necessary to avoid any kind of insurance fraud. It is also necessary that sometimes it happens that criminals get information about your strategy about detecting and preventing fraud and can heart you some other manner. So, beware of different market changes to prevent fraud.