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Reducing fraud: insurers' main objective

13 September 2021 · By Irene Martínez

Fraud is one of the biggest threats to any insurer and trying to reduce fraud should be their main objective. Even something seemingly small, like a client providing false contact information, can have major repercussions across the business. 

Of course, fraud negatively affects policyholders too. An insurer will need to charge higher premiums in order to recover money lost from false claims and the legal costs that accrue while pursuing action against fraudsters.

Unfortunately, the battle against fraudsters is a difficult one — not helped by outdated technology and a shortage of skilled resources. So how exactly can you reduce fraud? Artificial Intelligence technology may just hold the answer.

The use of AI in reducing insurance fraud

AI offers insurers a dramatic reduction in fraud, both detected and undetected. It saves your agents from becoming overwhelmed with time-consuming paperwork and processes. Most importantly, though, it saves you money.

Smarter underwriting for reduced fraud

Underwriting in the health sector has already seen the benefits that AI can bring. A huge boost in wearable devices has ushered in an age of smarter underwriting, thanks to the wealth of data they provide. However, insurers are quickly realizing the advantage it can give them when it comes to tackling fraud. 

In the underwriting stage, advanced analytics from a range of devices — from wearables to built-in sensors on vehicles — can give a huge range of data to help identify signs of fraud. This is all fed into the IoT (Internet of Things) which helps to capture the identity of the customer, linkages to fraud, and other abnormal behavioral patterns. 

This simplifies workflows for claims handlers at the First Notice of Loss (FNOL) stage. Within seconds, AI can assess the analytics and help claim handlers validate a larger number of claims with greater accuracy. 

Deciding on premiums is dramatically simpler with help from AI. Instead of the usual questionnaires, a company may deploy a chatbot to automatically explore a potential client by using the wealth of data collected from various sources. Machine learning can determine the future behavior of the client based on their present actions — and this can indicate the risk that the policyholder may pose to the company.

A popular method of machine learning for insurers is something called ‘deep anomaly detection’. Anomaly detection works by analyzing genuine claims made by clients and forming a model of what a typical claim looks like. This model can then be applied to large data sets to use as comparison against new claims. 

The more data the AI collects, the more accurate its decisions become — making it nearly impossible for fraudsters to operate over time. 

Visual evidence to spot inflated claims (and encourage honest ones)

Visual evidence is essential to get right, especially when it comes to home or car insurance. Collecting accurate evidence could mean the difference between catching a fraudulent claim or suffering a significant loss. 

Insurers can use visual analytics to assess damages based on un-tampered video or still images. At the same time, AI can quickly compare between other instances — assessing whether the damage accurately equates to the amount that’s been requested.

Gathering evidence after an incident can be a stressful process for many, so it’s understandable that evidence in legitimate claims could be called into question. If you bump your car or there’s water gushing through your roof, the quality of your evidence won’t always be top of mind! In many of the most dramatic (and therefore high-value) claims, the affected party won’t be able to focus on gathering the data that the insurer needs. 

AI can help here, too. Using in-app cues, clients can be guided through the evidence-gathering process — by AI, on behalf of the insurer. With the built-in AI telling them what to include, this helps policyholders to gather credible, accurate evidence and removes the opportunity to exaggerate damage or tamper with any content before submitting. 

With the visual evidence and data from the IoT, AI can compare timestamps to detect unexplained delays between the incident and the evidence-gathering. Extended time between the incident and evidence can be an indicator of evidence tampering, such as additional damage purposely caused by the insured party in order to claim a larger payout. 

Improving consumer trust 

Trust is a huge obstacle within the insurance industry thanks to fraud. As cases of fraud increase, insurers have to be more vigilant to avoid being stung by false claims. This can, sadly, lead to the impression that insurers are trying to “catch out” their clients rather than looking after their interests. 

This has spun into a damning cycle of distrust in a sector that should be built on strong relationships.

Despite worry from some policyholders that AI can be used to deny their claims quicker, AI can actually provide a number of ways to improve trust among the insured. 

A reduction in fraudulent claims slipping through the net means that premiums will go down, but it also allows clients to feel at ease. Knowing that their insurer is able to differentiate between fraud and legitimate claims gives them peace of mind that their claims process will be quick and easy.

The personal touch is something consumers are looking for once again after a period of faceless relationships with the companies they buy from. AI applications such as chatbots can help give that personal touch without the need for human interaction, saving the insurer time and money. 

AI can create personalized plans based on the data it receives from the IoT, giving the customer what they need rather than bundles with minimal individual value. Offering that little bit of personalization lets the client know that you care.

As trust between the client and insurer grows, motivation to commit fraud falls as the client no longer feels like a case file and, instead, feels valued and listened to. Combine that with reduced fraud on the whole and you can see how using an AI or VI system like Bdeo can improve your business without costly and time-consuming measures.

Reducing fraud together

Bdeo are pioneers in the visual intelligence industry and are already helping brands like Admiral Seguros and Zurich reduce fraud and connect with their customers. 

Request a demo today and let us show you the advantages.

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