Preventing a crisis from being an insurance fraudster’s paradise

February 28, 2024

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By Ian Carman, Director of Investigation Services

There’s a reason why UK insurers invest at least £200 million each year to identify fraud — it’s now the most reported crime in England and Wales, according to the Association of British Insurers (ABI). Even as government agencies and insurers step up their fraud detection processes and pursue widespread efforts to mitigate it, fraudsters show no signs of letting up — they’re only changing their tactics. 

Despite these challenges, we do know that the majority of claims are valid, and part of what matters to genuine policyholders is that suspect claims are quickly identified and tackled. With the right fraud detection tools and strategies, we can better support and protect genuine customers. 

UK fraud trends

On its face, some may feel relieved by the current fraud landscape, as 2022 saw a 19% drop in the number of fraudulent insurance claims uncovered since the previous year. However, this stat alone is deceiving. Despite the decrease in detected fraudulent claim volumes, fraudsters’ behavior has shifted from low-value, attrition-level, opportunistic fraud that produces low returns — spillages, or losing a thousand-pound watch, for example. They’re now carrying out higher-value schemes. The resulting financial implications for insurers only solidifies the need for sufficiently trained investigators and robust counter-fraud tools in place.

Striking a balance

A solid counter-fraud strategy boils down to two things: humans and technology. One cannot do its job effectively without the other. On one hand, humans are necessary to develop closeness with the claimant, exhibit empathy and genuinely strive to understand their plight. As investigators interact with customers and provide a human-centered approach, technology tools supplement the latter half of the invisible counter-fraud strategy. Rather than a days-long, human-to-human investigation that only gathers a fraction of the evidentiary results, tools use sophisticated data-based detection algorithms to assess and flag risks — far more accurately and quickly. 

This dual approach, with multiple layers of protection to fill stopgaps, allows detection to continue while keeping the claims process moving forward.

Adjusters strike the delicate balance between asking questions without coming across as aggressive or accusatory. This ensures that each claimant has a positive customer service experience and ultimately feels cared for. Investigators must approach each case with empathy to ease a claimant’s difficulties post-crisis. 

Harnessing counter-fraud tools

Most people think of counter-fraud tools’ main purpose being that they spot fraud. That is true, a small percentage of the time — however, what the tools accomplish the other 95% of the time is allowing genuine customers to have the smoothest, quickest journey possible through the claims process. 

As fraudsters take more sophisticated steps to avoid fraud detection, Sedgwick uses, among other tools, artificial intelligence (AI) to stay ahead — identifying virtually all types of fraud, from individual actors to sophisticated fraud networks and providing detailed reasoning and actionable background information for fraud risks. It can be powerful in examining data exchange.

As the human investigator asks the claimant questions and tries to understand their sentiment — something data cannot determine — tools simultaneously are doing their job of finding data-backed evidence of risk that supplements the investigator’s findings, and vice versaIt is important that genuine customers do not feel they’re being interrogated or suspected of fraudulent intent — the real scrutiny goes on in the background, as technology analyzes risk factors and verifies each step of the claim.

Staying one step ahead

In some cases, before a crisis event takes place, data can help identify customers that are more likely to pose a heightened risk. This type of counter-fraud strategy, along with AI and other tech, can improve the claims process and outcomes. Organizations must adopt a ‘machine and human’ partnership approach, rather than look upon the challenge as ‘machine versus human’. Digitising the claims process isn’t the primary solution in terms of tackling fraud; it takes two — technology combined with human interaction — to significantly impact fraud rates. The best practices outlined in this blog can stop opportunist and organised claims fraud in the UK and around the world.

Learn more > read the flyer to learn more about our fraud claims service and bookmark Sedgwick connection for the latest insights from industry leaders around the world.

Ian Carman, director, UK investigation services, Sedgwick

Tags: Brand, Claims, claims fraud, Fraud, fraud claims, Preserving brands, Technology, UK