Insurance fraud no longer a sideline issue

As insurers embed fraud expertise across claims operations, and technology takes on more of the routine screening, collaboration is becoming a competitive advantage. Martin Friel reports.

 

Fraud has traditionally been viewed as the responsibility of specialist teams, called upon when claims handlers suspected something isn’t quite right. But across the insurance market, that model is beginning to change.

According to a survey of claims and fraud professionals conducted by Insurance Post in conjunction with CRIF, almost nine in ten (89%) believe collaboration and information sharing are either critical or very important to tackling fraud. So far, so normal, but dig into the detail of what is happening on the front lines, and it appears that a fundamental shift in the way claims and fraud teams work together is underway.

Rather than operating as investigators on the sidelines, fraud teams are increasingly becoming educators and enablers of the organisation, embedding their expertise throughout the claims journey and giving frontline teams the confidence to identify suspicious behaviour when it matters.

 

Moving fraud protection to the front line

For Jan Martin, head of third-party claims at And-e, that shift begins at first notification of loss.

“The interaction is good and very much improved,” he says. “For us, it has been trying to educate the front-end claims teams so that effectively, they are the front line of fraud screening, but they may not even be aware of that.”

They may not know it because fraud detection is becoming part and parcel of the claims handling job. Rather than relying solely on specialist investigators, organisations are increasingly equipping claims handlers with the knowledge and support they need to recognise potential fraud themselves. It is an approach that comes through clearly in the survey results with 84% of respondents saying they now use fraud training and awareness programmes.

 

Technology as an enabler

Technology is playing an important supporting role in this evolution of the claims handling role, but not in the way many might expect. It is enhancing, rather than replacing, human expertise.

At And-e, information gathered during customer conversations feeds fraud models operating behind the scenes, helping to identify claims that merit closer scrutiny. Importantly, however, those fraud risk scores are hidden from claims handlers.

“We want people to investigate but we don’t want them to tell customers they have a fraud mark against them,” says Martin. “There are false positives that end up not being fraud, so we need to be careful about how these indicators are used.”

We want people to investigate but we don’t want them to tell customers they have a fraud mark against them.

Jan Martin, And-e

A generation ago, fraud investigations typically sat outside the mainstream claims process, with specialist teams taking ownership once a referral had been made. Today, the emphasis is shifting towards identifying risk earlier while ensuring genuine customers are not subjected to unnecessary delays or intrusive investigations.

“The Financial Conduct Authority is looking at response timescales and things like that are part of the challenges that fraud teams have to deal with,” Martin says. “We can’t investigate things for months and months.”

Instead, technology is increasingly being used to direct specialist expertise towards the cases that genuinely require it, while allowing the claims teams to process genuine claims more quickly.

And for Scott Clayton, head of claims fraud at Zurich, technology has helped to bring the two functions closer together.

“It’s closer than it ever has been,” he says. “We have implemented fraud tools to solve fraud problems rather than the bigger picture, which is validation. So, it is much more integrated now and the technology serves the needs of claims and fraud specialists.”

A collaborative approach

The result is that fraud capability is no longer confined to one department. Claims handlers still bring experience and instinct, while fraud specialists provide deeper expertise and investigative support when required.

“In the past, most fraud referrals came from claims handlers,” Clayton says. “We are now close to 50% of referrals coming from technology.”

That is a significant shift and one that starts to show the efficiencies that technology can bring, but rather than replacing human judgement, technology has changed where that judgement is applied.

“It’s hard to remove one or the other,” Clayton says. “The human has the gut feeling that tech can’t do, and the tech can make links that humans would miss. The two are very complementary.”

Chrystal Sorkin-Hanrahan, senior fraud analyst at Inshur, describes anti-fraud interactions in her organisation as increasingly proactive and supportive, rather than being seen more as a traditional policing operation.

“We are quite lucky in that we have a great relationship with the claims team,” she says. “We share information, are involved in training and have triggers at certain points of the claim which means we can step in and offer advice.”

In the past, most fraud referrals came from claims handlers... we are now close to 50% coming from technology.

Scott Clayton, Zurich

“We are not seen as blocking anything,” she says. “We work closely with claims, we advise them and, ultimately, you are upskilling the claims people rather than just taking it all on ourselves.”

That philosophy is becoming increasingly common across the industry, with fraud specialists continuing to provide the investigative expertise, but they are also helping to build fraud awareness across underwriting, claims and customer service functions.

Richard Cliffe, counter fraud and recoveries manager at Collinson Insurance, says they have embedded fraud champions in claims teams to act as the link between claims and fraud, while regular fraud clinics, case studies and feedback sessions help ensure knowledge spreads throughout the organisation, rather than remaining just within the fraud team.

Sharing intelligence

This appetite for collaboration is clear in the survey results with 79% of respondents regularly exchanging fraud intelligence during active investigations, 57% doing so during early-stage claims assessment and 51% at first notification of loss.

 

Despite the progress on internal collaboration, significant challenges remain, with almost half (45%) identifying cross-industry data sharing as one of their biggest obstacles. Unsurprisingly, nine in ten said they would support a secure, standardised digital system for sharing fraud information.

“The Claims and Underwriting Exchange has gaps, and we have contacts with peers to fill those gaps, but it is ad hoc,” he says. “But the Insurance Fraud Bureau is looking at creating a repository where people can interact, exchange and request information.”

Fraud teams are no longer simply investigating suspicious claims after they have been referred. They are shaping processes, educating colleagues, developing technology, sharing intelligence and helping every part of the organisation recognise fraud earlier in the customer journey.

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