Big data analysis is very effective at combatting fraud, but there's more. For one, the ability to catch patterns of fraud may turn potential fraudsters away at the gate, before they even attempt to file a first notice of loss. Secondly, confidence in analytics to catch potential fraudsters will smooth and speed up the clean claims, improving customer satisfaction.
That's the word from Kim Minor, insurance industry marketing manager at IBM, who is a proponent of applying big data analytics to this leaky area of the business. In a recent podcast, she points out that up to 10 to 20 percent of claims are fraudulent.
Clean claims go through faster, which reduces costs for insurers, and also makes customers happier as they get their money back faster. Also, by pulling in social media data, insurers can more readily spot evidence of fraud.
“Our goal is to prevent fraud,” says Minor. “We don’t want the insurance company to ever take that claim. When they first receive that first notice of loss, they may be able to say something like, 'oh my, you’ve been having a really bad year. We’ve noticed that you have been involved with claims throughout the year.' Just to alert the person reporting the claim that we might be on to them, and usually they will choose not to report that claim.”
Along with heading off a potentially fraudulent claim, the ability to detect fraud makes things flow for the 80 to 90 percent of legitimate claims, she continues. “An interesting byproduct of this is the clean legitimate claims that come in get processed so much faster, because they don’t have to be bogged down. Then there's really positive impact, particularity in the economic times were having, to do cross-sell activity. It's just the added benefit of where there’s a legitimate claim, it really goes a long way with retention efforts, a truly strong customer story as a byproduct of adopting a strong analytical process at claims.”
Minor reports witnessing a “30-plus-percent improvement in retention” at a client that was able to “focus their effort on potential fraud and reduce the amount of human involvement.” In the process, special investigation units can focus their efforts on the cases that really matter.
Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.
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