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How Technology Helps Prevent Fraud in the Insurance Industry
Predictive modeling employs machine learning (ML) and data mining to examine past behaviors in order to forecast possible future outcomes
Fremont, CA: There has been an increase in fraud and suspicious activity since the beginning of the COVID-19 pandemic. Insurance fraud attempts have become increasingly sophisticated, forcing insurers to embrace technology and implement anti-fraud technology to identify suspicious activity in a more proactive manner.
Embracing Alternative Data
Data is at the heart of fraud detection: the more data an organization has, the more informed its risk-adjustment decisions can be. Given the critical importance of data for an effective and accurate fraud management system, insurers are increasingly embracing new data sources.
While the study found that internal data is still the most commonly used data source (100 percent), a growing number of insurers are indicating that they are using alternative data. Unstructured data, in particular, has seen a significant increase in usage, rising from less than half of respondents relying on this data source in 2018 to 81 percent in 2021.
Anti-Fraud Tech Flourishes
According to the study, as a fraud in the insurance industry continues to rise, so does the adoption of anti-fraud technology. Predictive modeling was used by 80 percent of the 100 insurance companies polled to detect fraud, up from 55 percent in 2018.
Predictive modeling employs machine learning (ML) and data mining to examine past behaviors in order to forecast possible future outcomes.
Adoption of text mining has increased even more rapidly, rising from 33 percent in 2018 to 65 percent in 2021. The process of extracting high-quality information from various written resources is known as text mining.
Image-based fraud prevention techniques are also becoming more popular, with over 30 percent of insurers reporting that photo recognition/analytics will be used in their fraud prevention efforts by the end of this year.
These technologies enable insurers to determine whether a photo of a claimed damage is genuine, has been digitally altered, or has previously been submitted on other claims, avoiding the requirement for in-person inspections and ultimately saving money.