Insurance fraud. Fight it with FICO
Insurance companies face various problems and risks. The model of risk is specific for each company. But it is possible to distinguish common parameters which influence models of risk, such as company size, amount of insurance operations, company activity, geography, number of insurance services, financial stability, etc.
Though insurance fraud is closely monitored and severely punished, its numbers are still high. According to the Coalition against insurance fraud, in the United States, about 10% of insurance payments were paid to scammers.
They say the best way to cure a disease is to prevent it. Advanced machine learning analytics, best-in-class detection strategies and cognitive fraud analytics of FICO anti-fraud software are the best solution for your company.
What is fraud insurance?
To study the problem mentioned above it is important to understand what fraud insurance is. It may be defined as an illegal act or activity on the part of either buyer or seller of an insurance contract. It is usually aimed at gaining financial profit.
FICO & FBI vs. fraud
Since 2012, FICO has been partnering with the FBI. They combined their forces to shield businesses from fraudulent activity and scammers. This partnership is a natural benefit for both sides. They can share their databases and fight fraudsters even more effectively. Law-enforcement officers can inform FICO specialists quickly about new and emerging fraudulent schemes. FICO developers rapidly include them into AI-databases for further use.
The Coalition Against Insurance Fraud statistics says that in the United States and Canada, scammers usually deal with medical and life insurance fraud. While in Europe, illegal activity more often takes place in the sphere of property insurance, including auto insurance.
Types of insurance frauds — know your enemy
There are many ways of gaining money illegally from insurance companies. Scammers are very inventive in this sphere. While insurance companies spend more and more money and effort on security measures and fraud insurance investigators’ training, fraudsters become even more cunning and shrewd in their methods.
These are some of the types of insurance fraud:
Health insurance fraud
This type of fraud is characterized by providing false or misleading information to a health insurance company in the attempt to make it pay unauthorized benefits to the policy owner, a third party or the entity providing medical services.
An individual policyholder can commit health insurance fraud by allowing the third party to use their identification data and health insurance policy to get health care services. Or to use insurance payments to obtain medicals which were not prescribed by the doctor.
Health care providers’ fraudulent acts may be like billing for medical services and treatment that were never provided; charge for more expensive treatment than the ones actually administered; prescribe unnecessary medical procedures to get more profit; falsification of diagnosis to justify expensive treatment and procedures, and so on.
Life insurance fraud
Here are the most widely spread kinds of life insurance fraud an insurance company should be aware of:
- Application fraud takes place when someone intentionally distorts their personal information to pay lower premiums and get higher benefits.
- Forgery happens when a third party, not the policy owner, makes changes to the policy online, over the phone or in any other way.
Though faked death looks like something unusual and even cinematic, it is not unheard of for policyholders to falsify their deaths on paper to get access to their insurance payments.
Auto insurance fraud
This type of fraud is a global fraud phenomenon which causes billion-dollar losses according to FBI reports. Auto insurance fraud is subdivided into three large categories.
- The first one is called opportunistic fraud. An automotive insurance policy holder uses a real car accident to obtain illegal profit by deliberately exaggerating the actual damage of a vehicle.
- The second type takes place when a scammer commits a premeditated scheme, which is characterized by repeatedly charging an insurance company overvalued sums for goods and services necessary for car repair.
And the third type of auto insurance fraud is an organized crime scheme when entire groups of people are involved in the attempts to get insurance payments from insurance companies on a regular basis.
Types of Insurance fraud investigation
An insurance fraud investigation is a type of inquiry that focuses on fraudulent claims. For this purpose, insurance companies hire a team of fraud insurance investigators who are experts in various fields.
There are several types of insurance fraud investigation:
- Health insurance investigation deals with cases connected with health policy fraud.
- Car insurance investigation helps to find out actual expenditures on vehicle repairs, circumstances of an auto theft, etc.
- Home insurance investigation deals with real estate fraud insurance.
- Life insurance investigation uncovers cases of people who claim exaggerated sums of money for life insurance.
- Workers compensation insurance investigation deals claiming compensation for an injury.
Insurance company fraud investigation takes place when bad practices occur within insurance companies themselves.
FICO makes insurance fraud investigation redundant
As mentioned above, insurance fraud is the reason behind sufficient financial losses for insurance companies. The FBI states that the total cost of insurance fraud is about $40 billion per year. That is why insurance fraud is a serious felony that is punished by imprisonment or heavy fines.
FICO makes investigation redundant because it puts a priority on preventing fraud. Due to deep analysis of fraudulent schemes, common scenarios are recognized by artificial intelligence (AI) and a company gets an alert signal. The company’s security specialists investigate it if it is needed. But practice proves the high efficiency of FICO products in this sphere. Activities that are blocked by AI are almost always scams.
FICO tools have been developed to make a preemptive strike on fraudsters and prevent loss of money and reputation. Based on advanced AI-algorithms, FICO anti-fraud software can not only find and stop attempts of fraudulent acts, but also learn and prevent new schemes due to its analytic blocks.
A cure for the disease, or FICO fraud detection solution
At the current stage of computing and software development it is possible for insurance companies to avoid insurance fraud instead of dealing with the consequences of fraudulent activity. A wide range of fraud detection systems and fraud prevention services were developed by numerous fraud detection software companies. One of the leaders among them is FICO which specializes in software development for banking and other business industries.
FICO fraud detection product line contains software for a variety of purposes:
- FICO Fraud alert network
- FICO Application fraud manager
- FICO Consumer fraud control
- FICO Identity resolution engine
- FICO Falcon platform
FICO Fraud alert network is a community that unites experts in the sphere of anti-fraud activity. It is open for financial institutions employees and law enforcement professionals. A member of the community can get consultation and help in establishing security of the company.
FICO Application fraud manager with its advanced AI helps to identify whether the identity is stolen, synthetic, manipulated or true name. It detects fraud types – from organized to opportunistic.
FICO Consumer fraud control is a mobile application. Its target audience is not business reps but consumers. It helps to shield from potential fraud and thoroughly manage customer’s daily card use.
FICO Identity resolution engine is an analytic platform that strikes a decisive blow against fraudsters. Its user-friendly interface provides an opportunity to make a deep network analysis and examine metadata of networks and characteristics between events, people, places and documents.
FICO Falcon platform operates in any channel and with any data. Due to its cognitive fraud analytics block and Falcon intelligence network, it helps companies to detect and prevent fraud seamlessly. The platform works unnoticeably, preventing and monitoring suspicious and fraudulent activity.
It is better to prevent insurance fraud than to deal with its consequences. Preventing not fixing can save an insurance company a lot of money, time and effort. FICO fraud detection software is a helping hand that can provide this opportunity.