Insurance Companies Refine New Tools to Beat Fraud
By Devin Ballam, Marketing –
Insurance companies are using a complex historical regression model to analyze relationships between customers to weed out likely candidates for fraudulent behavior.
Each year billions of dollars are lost to fraud and corruption. Criminals are becoming ever more sophisticated, as the rewards prove increasingly valuable. With such a large loss of money at play, organizations are trying to figure out how to detect and stop fraudulent practices.
One industry that suffers large losses each year is the insurance industry. Historically, the insurance industry has relied on business rules and manual process to review for fraudulent claims. Unfortunately, this method has proven ineffectual against modern forms of corruption, as companies continue to suffer high losses each year.
Many insurance companies spend a lot of time vetting innocent customers while criminals are still at large. Not only are they losing money to criminal activity, but they are also wasting funds in the searching process.
Taking it to Technology
To aid in the fight against corruption, the insurance industry turned to technology to catch fraud electronically.
While reading claims, they looked for patterns, or key words to identify fraud. This technique was written into an algorithm so computers would be able to identify and catch fraud. When tests were done to see how effective this new strategy would be, the results were very promising.
Studying Relationships
The insurance industry, though, was not satisfied, so it continued to study and modify their detection schemes. They began to analyze relationship patterns, noting people who associated with customers they had previously caught engaging in fraudulent activities.
A historical regression model was created to track down potential fraudulent customers using historical data from others who had been identified. The results of the tests were highly accurate and they were able stop with their old methods and implement their new detection technique. Now to find fraud, the insurance industry rates customers’ probability of committing fraud using a combination of the algorithm, a social media analysis and the regression model. With this score they’re able to identify 90 percent of the fraudulent behavior perpetrators.
Fraud Detection― A Worthwhile Investment
The project took about three months to complete, but the results rendered many benefits: the project paid for itself by saving the industry 30 million dollars annually; by taking some valuable time to minimize fraud and corruption the company now has an effective way to maximize profits.
Almost all industries like insurance face fraud and corruption and there exist many ways to prevent and reduce losses. All will require resources to implement new detection methods, but in the end, the benefits will pay for any resources lost in finding the most suitable method.
A Polygraph Alternative
One universal solution to detecting fraud and corruption, especially within a company, has been the use of polygraph technology. However, new developments like EyeDetect™ can be used in place of or in conjunction with the standard polygraph tests.
EyeDetect can help identify perpetrators of fraud and corruption with a simple, non-intrusive test that poses a series of true or false statements. The subject in question is asked to answer truthfully and if deception occurs, it’s recorded by an optical scanner utlizing unique technology.The average accuracy rate is 85 percent.
Such technology can help minimize fraud and corruption by preventing and identifying those who are in positions of practicing such behavior.
