Insurance Industry's Top 4 Advancements in Fraud Detection Technology

In the ever-evolving landscape of the insurance industry, the fight against fraud has taken on a new dimension. With the rise of advanced technologies, insurers are now better equipped than ever to assess risk and combat fraudulent activities.

The COVID-19 pandemic has unfortunately led to a surge in fraud and suspicious activity within the insurance sector. However, insurers are rising to the challenge, investing heavily in fraud detection solutions. According to recent reports, the proportion of fraud may represent as much as 22% of global insurance claims.

One of the most significant growth areas has been the adoption of automated fraud detection solutions. Referrals coming from these solutions have increased from 20% in 2018 to 30% in 2021. Predictive modeling, using machine learning (ML) and data mining, has become a popular tool in this fight. As of 2021, 80% of insurance companies surveyed use predictive modeling to detect fraud, up from 55% in 2018.

The health insurance sector has experienced the strongest growth in the application of anti-fraud technology. AI, machine learning, and data analytics are the most in-demand technologies. Adoption of text mining has grown significantly, rising from 33% in 2018 to 65% in 2021.

Insurers are also increasingly turning to unconventional data sources to improve their fraud detection systems. Social media data usage by insurers has increased, with nearly half of insurers surveyed in 2021 using it, against about 37% in 2018. Public records have also seen a notable rise, increasing from about 60% in 2018 to 79% in 2021.

Image-based fraud prevention techniques, such as photo recognition/analytics, are becoming more popular. Over 30% of insurers reported their use in 2021. These technologies allow insurers to determine whether a photo of a claimed damage is real, digitally altered, or has been submitted previously on other claims.

Industry fraud alerts or watch list data have also seen a significant rise in use, with 88% of insurers using it in 2021, compared to about 60% in 2018.

However, the adoption of these technologies is not without challenges. Limited IT resources and data integration/poor data quality are the most significant implementation challenges, cited by 68% and 64% of insurers respectively in 2021.

Insurers are excited about investing in predictive modeling, with 54% considering it within the next 12 to 24 months. Almost a third (31%) of insurers are looking to invest in identity verification/authentication technology.

The total cost of insurance fraud in the US (non-health insurance) is estimated to be more than $40 billion per year, according to the FBI. With these staggering figures, it's clear that the fight against fraud is a top priority for the insurance industry.

In conclusion, the insurance industry is embracing new technologies to combat fraud and improve their risk assessment capabilities. From predictive modeling to social media data usage, insurers are leveraging a wide range of tools to stay one step ahead of fraudsters. Despite the challenges, the industry is committed to making significant strides in this area in the coming years.