Several recent items in the news highlight the fact that insurance fraud continues to be a drain on society, both in the US and the UK.
In the UK, Legal and Medical reported that four people had been arrested in an insurance fraud scheme that involved staged car accidents, a common technique.
Allianz insurance alerted Merseyside police about a number of suspicious motor insurance claims in 2005. This led to the arrest of three men and one woman. . . . Detective Inspector Alyson Wilson of Merseyside Police’s Force Operations Unit said: “This is an unscrupulous crime that affects the premiums paid by the public and impacts on the whole of the motor insurance industry.”
We previously linked to an article in the Little Falls Times that had this to report about the financial impact of insurance fraud:
Insurance fraud costs Americans at least $80 billion a year. If this illegal activity were a legitimate industry, its profits would exceed Toyota, IBM, Wal-Mart and Microsoft. If measured by sales, insurance fraud would crush Johnson & Johnson, Proctor & Gamble and Coca-Cola among many more of the Forbes Global 2000.
The article goes on to state that “approximately 25 percent of insurance premium dollars going toward the effects of fraud.” In fact, we estimate that the cost of insurance fraud (plus retail fraud) adds up to over $600 per year for every American household, a number we like to call the “fraud tax“. You can bet that if the guys and gals up in Washington D.C. decided to levy a $600+ tax on every household that people might get a bit upset. Yet the fraud tax is hidden in the cost of premiums and the cost of goods so we don’t even notice it. But, believe us, it’s there, and it’s impacting each and every one of us. I mean, what would you do with an extra $600? That’s almost enough to buy two iPhones.
WSAZ.com recently reported on an insurance fraud case that involved arson.
Two Huntington have pleaded guilty to insurance fraud, arson and other charges. The West Virginia Insurance Commissioner says that 29-year old Richard E. Sturgill and 43-year old Jeffery Maynard, entered the pleas in Wayne Magistrate Court back on October 30. . . . The release says both conspired to burn a vehicle owned by Mr. Sturgill on March 18, 2007 and then filed a false insurance claim for the loss. . . . The Insurance Commissioner added, “Automobile insurance rates are affected by criminal acts such as these and we are committed to investigate and prosecute individuals who try and use insurance as a means of personal profit, while other customers pay for their acts”.
When you add arson to the mix, you’re not only costing people money but you’re also risking lives.
From the Little Falls Times article:
[Frank Henry, special investigations manager for One Beacon Insurance] said. “Staged auto accidents and arson can cause innocent people to be killed or seriously injured. Workers’ compensation costs are encouraging businesses to relocate out of state. Insurance fraud is a crime, a crime punishable by law.”
Another recent article in the UK’s Oldham Advertiser cited a new method that the insurance industry is using. It’s called voice recognition analysis (VRA), and it’s based on military interrogation techniques. The VRA systems detect “stress patterns – such as hesitation or changing of answers – in the voice of callers to indicate whether they might be lying.”
VRA is an innovative approach to insurance fraud and would seem to have significant benefits. But with more and more people filing claims online, insurance companies desperately need a way to analyze data, both structured and unstructured, to find suspicious patterns that might indicate fraud. Identity resolution (or entity resolution and analysis as Gartner terms it) provides this capability along with the ability to apply domain specific rules and automatically feed the results back into business processes.
We need to repeal the fraud tax on every American household. Insurers have a responsibility to their customers to use all reasonable means to address insurance fraud. Mihar Pandya, Allianz Insurance Fraud Manager, states it best:
The industry should be united in its efforts in disrupting this activity. In addition to working with the Insurance Fraud Bureau, the industry must continue to invest in its own fraud management strategies in order to remain effective in countering this threat.