Fraud and the Underwriter

Fraud….  For anyone in insurance, the word causes furrowed eyebrows and grim looks. It’s out there and we know it. It costs the global insurance industry tens of billions of dollars annually and has been around since the advent of insurance. Still, much of the work on ‘prevention’ has only occurred post-claim, mitigating the damage done and creating punitive precedents to discourage would-be fraudsters. Is it time for that to change? I think so. With increasing access to data and the propagation of automation, however, the underwriter appears poised to take the battle to the forefront and become even more critical to fraud prevention.

Automation is providing underwriters with the ability to spend less time underwriting their book of business, at least under current standards. Mundanely, this suggests an underwriter could expand their portfolio and enables insurers to meet growth objectives without increasing their staff – a model of operational efficiency and reduced costs. In my mind, this approach, while not without its rewards, falls short of achieving a high level of benefit for an insurer. Rather than funnel all of this ‘newfound’ time into increasing piecemeal work, it may be better spent on increasing the depth of risk analysis. This expansion of risk analysis would remunerate itself in the identification of potential fraud and help address this area of loss before having to invest in post-claim forensics. With more time to evaluate not only individual policies but the whole portfolio, the links between potential fraud and risk characteristics could be more deeply examined and associated.

Time to examine a risk only goes so far unless there is more to analyze. Fortunately, coupled with automation, there is a new accessibility to risk data. Telematics is one such source of data that will undoubtedly provide new ways not only to address fraud post-claim, but also extend the data points that will help the underwriter identify it up front.

I’m looking forward to seeing an increase in the teamwork between claims and underwriting staff as they share experiences and train underwriters on where to look for the links. The war on fraud is far from over, but the front lines are getting the reinforcements they need to continue to move the battle forward.