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Insurance fraud, a growing problem

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Insurance fraud

Since the beginning of the economic crisis in 2013, insurance companies have seen a large increase in fraud cases within the insurance world. For example, the AXA report of March 2015 already noted an increase in fraud cases of 8.6% between 2013 and 2014. It highlighted the industries with the highest fraud rates: automobile and household, commercial, office and community. Cars are much higher, with 67.37% of total fraud in the company. And this trend continues, as reflected in the report of the XXIII Sectorial Contest of Fraud Detection carried out by Unespa, since 6 out of every 100 injuries by accident in the automobile sector are fraudulent. This report also reflects the general increase in the impact of fraud due to the number of accidents reported in all areas between 2015 and 2016.

But not all cases of fraud are comparable, nor do they have the same economic impact on insurers. One could say that there are three different types of fraud:

  • Opportunistic: taking advantage of a real accident to put in previous damages and it is the most common practice
  • Premeditated: the damages claimed can be real or fictitious, but the most important thing is that they have been planned in advance
  • Organized: organized gangs that sometimes have support even within the sector, which carry out a professionalization of crime, the latter being the most dangerous of the three

Some of the most striking cases discovered by insurance companies in 2016 were

  • A network simulating outrages in Seville: after two very similar cases of outrages in the space of a month, the insurance company began to investigate and a network of simulated outrages was uncovered. Thirty traffic accidents were involved and some of those involved repeated up to 19 times
  • A lawyer who recruited injured people: the insurance company realized that the same lawyer was involved in several similar cases and so it was discovered that this lawyer recruited injured people to pass them off as victims of traffic accidents
  • Engines for sale: a businessman from Toledo reported a shipment of engines stolen and, after receiving compensation, the insurance company investigated him and discovered that he was selling the allegedly stolen engines
  • An accident that makes normal life in Facebook: in Zaragoza some young people have a traffic accident and one of the accidents presents after the mishap a limit IQ, difficulties in communication and various problems, although doctors have expectations that it can improve, the affected does not present improvements. The compensation she claimed was more than 1 million euros and, after an investigation by the insurance company, it is shown that the affected person lives a completely normal life without injury, leaving evidence of this on Facebook, so the final compensation was 240,000 euros.

For every euro invested in investigating fraud cases, 34.70 euros have been saved in undue compensation between 2015 and 2016

In some of these cases, insurers were able to detect the fraud as a result of investigating similar patterns of behavior. The UNESPA report shows that investment in fraud investigation by insurers leads to savings in claims, more specifically, for every euro invested, 34.70 euros in claims were saved.

But ... What if we had a system of alerts beyond behavioral patterns? What if insurers could link their customer information with other data to detect cases of fraud? This is the line of work you are working on today using smart graph. In this way, a wider variety of fraud cases will not be investigated, which otherwise would have been much more difficult to detect. For example, a garage that repairs cars that are not locally owned and related is a potential fraud risk that the insurance company should investigate.

You can also go further and use other technologies that do not help investigate new types of fraud but help prevent such fraud from occurring.

For these reasons, insurance companies are currently increasing their investment in the fight against fraud by increasing the number of cases they investigate and by increasing the amount of R&D focused on the fight against this scourge, which not only affects the insurance companies themselves, but also affects us all as premiums rise to mitigate the effect of fraud.

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