Auto Insurance fraud is a huge share of the net premiums written by carriers. It’s been going on for so long that the industry seems to accept rampant fraud as simply a cost of doing business. This isn’t true, of course, but the pessimism is real. Yet generically, the answer to insurance fraud is quite simple: carriers must pay attention. Both pay attention to what customers are doing and be seen by the customers as paying attention. Because if customers believe they are being monitored by someone who can detect their fraudulent activity, then their propensity to commit that activity will plummet.
But how? How can carriers successfully “Pay Attention” and be seen by customers as credibly “Paying Attention” such that fraud is deterred? There are 4 key steps that lead to the identification, elimination and deterrence of fraud.
Monitor every transaction both current and past. Looking for indicators that there could be a costly fraud or data issue in a given quote, endorsement, billing or claim. We don’t need to be certain, just have enough confidence to go and question the customer about it.
When an anomaly is detected, immediately intervene and question the customer during the transaction session. For example our idMobile AI Enhanced application to detect preexisting damage risks asks customers to take comprehensive images of their vehicles. It has intelligence that can assess whether the image is of a vehicle, whether it has a license tag and what number the tag is, whether the entire vehicle is in the image and so on.
Intervene specifically, calling out the issue and a specific set of questions or tasks the customer must respond to. Using our idMobile example, the AI can identify if the customer is taking an image that does not have enough light to see preexisting damage. idMobile automatically responds by a identifying the specific issue and asking the customer to repeat the step right then and there.
Close the loop, if the customer does not abandon the session or modify his transaction the carrier must either conclude that the issue was a false positive or immediately take constructive action that mitigates the identified risk. This could include changing coverage, modifying billing terms, excluding individuals or vehicles from the policy or simply slowing the process down.
Important things to keep in mind:
1.it’s essential that this process happen during the transaction. Waiting until after the policy is bound radically reduces the carrier’s flexibility. And by doing it during the transaction, the message to possible fraudulent customers is loud and clear: we are watching. Causing them to drop and go to brand x.
2. The key to the process is credible deterrence which is maximized by immediate and specific questioning. In our experience, the great majority of fraudsters will ‘out’ themselves by abandoning the transaction session or by modifying their transaction to meet the carrier’s concerns. Customers who have been ‘caught’ almost never follow through with their fraud.
3. But it is important that we follow through and complete all steps. If customers learn that the carrier’s questions do not have consequences, if the carrier does not ‘close the loop’ then the deterrent value of the system falls precipitously. Credibility lies in immediate and specific identification of a fraud issue and immediate consequences if it is not resolved.