At a glance
- Fraud is a major problem for the insurance industry, serving to increase premiums for honest customers
- The industry continues to invest in fraud detection and prevention, but techniques employed by fraudsters are also evolving
- We explore how Zurich’s recent investment in NetReveal software is making it harder for insurance fraudsters to avoid detection
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The latest available figures from the Association of British Insurers show that the total cost of dishonest insurance claims detected in 2017 was £1.3bn.
This poses a major challenge for the industry, and ultimately leads to steeper premiums for honest customers. The techniques used to perpetrate fraud are constantly changing, requiring the industry to continually evolve its approach to detection and deterrence.
Zurich’s recent investment in NetReveal software is a major step forward in the fight against insurance fraud, and is set to bring big benefits for brokers and customers. But why is it needed?
Why fraud detection techniques need to keep evolving
“While motor policies are typically where we see the most significant and organised fraud occurring, there is no product we underwrite where we haven’t seen fraud in some guise,” says Scott Clayton, Head of Claims Fraud at Zurich.
“Zurich has invested a lot of money in fraud prevention over the years, ranging from software tools to claims analysts and investigators, but fraudsters are always looking for new ways to get around the system. Professional enablers, ranging from solicitors, to credit hire companies, or even medical experts, can be particularly sophisticated, and know how to manipulate the system.”
In the past, insurers have typically relied on the Claims Underwriting Exchange (CUE) to find claims patterns that could highlight an individual worth investigating. But as Scott explains, this is not always enough.
“The challenges arise when an individual manipulates their identity by providing false address or name details, for example. This would be enough for a fraudster to avoid detection and subsequent investigation, as they would not be matched against previously fraudulent claims registered on the CUE system.”
Zurich’s investment in NetReveal is set to make it much more difficult for fraudulent claims to avoid detection.
How NetReveal fraud detection works
The NetReveal software platform uses complex algorithms and data analytics to uncover individuals trying to hide their identity and avoid traditional detection techniques, flagging activity for further investigation by claims investigators and analysts.
Scott explains: “Around 90% of motor and casualty data is now being put through the NetReveal system, as well as a significant proportion of Personal Lines property.
“This is a huge volume of information – including claims systems data, policy data, information from case management systems, and data from the Insurance Fraud Bureau and Insurance Fraud Register. Screening against the Insurance Fraud Register is particularly important, as this includes details of insurance fraud from across the industry.
“Once in the system, NetReveal breaks down every data item into an entity – a mobile phone, address, or vehicle, for example. This creates a database of millions of entities, from which the NetReveal solution can look for connections. For example, if a third party on a motor claim has a mobile phone number matching that of someone we have investigated on a suspicious housing claim, claims investigators know they need to take a closer look.”
The system then provides a further safety net during claims validation, by highlighting individuals with a poor claims history. For example, if someone makes a third escape of water claim within a year, the system would automatically flag that to investigators.
Not only does the NetReveal system identify links between entities and flag suspicious claims patterns, it uses probability algorithms to predict the likelihood that a claim is fraudulent – enabling claims analysts to prioritise investigation and helping to remove false positives identified by the system.
How Zurich’s use of NetReveal will keep evolving
“NetReveal has exceeded expectations, so there is much more we now want to do,” explains Scott.
In particular, the system could provide major value for underwriters at the policy application stage. “The first stage of the project has provided a lot of learnings we can now apply to underwriting,“ says Scott.
“For example, we are looking at how we can compare data in the NetReveal system with things like Equifax data and electoral rolls. This will provide underwriters with a wealth of data they can’t currently access, helping to identify those policy applicants attempting to disguise their identity.”
Scott adds: “This is not the end game, there’s still so much more we want to do, from working out how to improve data capture, to how we can work with other NetReveal users in the industry to start pooling data.
“Zurich takes a firm line on third-party fraud, and NetReveal enables us to uncover more of it. This brings major benefits to our customers, as reducing fraud helps to reduce premiums.”
For more information on the issues discussed in this article, please get in touch with your local Zurich contact.