For many years, the main priority of insurers has been to develop IT solutions to reduce policy administration and claims processing costs. While these are still very important, in-depth claims management is also equally important.
Insurance fraud is a reality that is becoming more concerning every day. According to the FBI, insurance fraud costs the economy over 40 billion dollars every year. Premium diversion, which is the most common type of insurance fraud, refers to the embezzlement of insurance premiums. On the other hand, asset diversion is when employees steal insurance company assets and fee churning is when third parties take underhand commissions through reinsurance agreements. In spite of this, most insurance companies pay surprising small attention to fraud in operational claims processing. Instead, most claims departments are processes driven with more attention being paid to adherence with regulations. The power of big data analytics means that insurance companies can now research and set profiles for fraudulent behaviors.
Obsolete IT systems
Some insurance companies avoid investing in IT technology in order to save money so their systems are slow and outdated. Because of this, their IT systems are unable to recognize potential cases of fraud and this results in poor audit quality and recognition rates. Ideally, insurance companies will invest in IT to improve system efficiency and claims management quality. Updating IT systems will increase the effectiveness of risk management through protecting confidential data and assets. A massive upgrade should be gradual and employees and customers should be given enough time to acclimatize to new technologies and platforms.
Improve Audit Methods
Many insurance companies have outdated investigation policies and protocols. The success of any fraud investigation depends on modern techniques and industry standard practices. For example, many insurance companies are incorporating law enforcement style interview techniques into their training programs. Specialized interview techniques help with determining the validity of claims and incident reports. Another example is cognitive interviewing, which uses advanced interrogation methods and psychological concepts.
Suspicious claims are often processed by regular claims handlers who have received limited fraud training. These individuals often have heavy caseloads, so they cannot comprehensively focus on case details. Being required to act as claims handler and a fraud investigator leads to mistakes and insufficient focus on claims management, especially if the department is busy with a long backlog. Instead, experienced claims specialists should be promoted and trained to become dedicated fraud specialists. This will take advantage of their claims experience, but allow them to specialize in fraud and improving claims management and processing
To capture reduces fraudulent claims and financial losses, insurance companies should focus on improving various aspects of their claims management program.