Manjit Rana in Modern Insurance Magazine, issue 69:
While much of the conversation over recent years has been around innovation, should we step back to ask - have we really been innovating fast enough?
Defrauding an insurance company 101
Whilst insurers invested over £200m to detect over £1b in fraudulent claims in 2023, the ABI estimates that a similar amount still goes undetected. Insurers are grappling with several key factors that are influencing the need for fundamental changes to current fraud detection systems.
The first is competition with bad actors. Simply put, our industry is not yet built to be able to identify fraud at the speed with which bad actors can commit it today using advanced technology. In that vein, less effort is required to commit fraud because of those very tech advancements. Compounding this is the rise of speculative or opportunistic fraud, where we’re seeing good actors become bad actors in a hardening economy - and today’s fraud detection approaches aren’t built to detect opportunistic fraud effectively.
EXAMPLE: See how easy it is to manipulate images to accompany fraudulent or exaggerated claims
The trade-off between speed of settlement and fraud detection is also pervasive. Insurers all want to move faster - particularly with pressure from consumer expectations and the introduction of Consumer Duty - but with current systems, the downside of moving faster is that more fraud gets through undetected.
Without making fundamental changes, the insurance industry will always be behind - meaning not truly innovating, relying on digitising yesterday’s processes, continuing to raise premiums to offset the cost of fraud, living with lowered customer retention, and customer mistrust.
Read the full article in Modern Insurance Magazine Issue 69 here.
