Insurers still ineffective at tackling fraud, says Ovum

Ovum has released its latest research report to check the need for effective fraud detection. The report showed that a number of technologies, including link analysis, text mining, and predictive analytics, have evolved to the extent that they now enable insurers to address the increasingly serious threat posed by professional fraud networks. This technology will become increasingly “adaptive”, enabling insurers to detect and respond to new and constantly changing techniques used by fraud criminals.

Although most insurers have invested in fraud technology to some degree in the past five years, the majority of this investment, while beneficial, has been piecemeal. Ovum’s analysis suggested that customer-interaction points including policy application and underwriting in addition to claim notification must be taken into account to improve the effectiveness of fraud systems.

Challenges such as the increased pressure on profitability, intense competition set against a backdrop of weak premium growth in most mature markets and the increasingly sophisticated tactics of criminal fraud networks, all mean that fraud is now an issue that insurers must urgently tackle.

Charles Juniper, Principal Analyst, Insurance Technology, Ovum, said, “New approaches are addressing the growing threat from professional fraud networks. To date, most insurers have focussed their fraud strategies on the claims process. In order to avoid organized criminal fraud, the effectiveness of a fraud strategy can be significantly enhanced by using technology across the entire insurance product lifecycle.

The other findings of the report revealed that an estimated 10 to 20 per cent of insurance claims are fraudulent with potentially less than 20 per cent of such fraud being detected.