Scribd
Upload
78 views

The Problem of Insurance Fraud

Insurance fraud costs billions per year globally. It involves deliberately deceiving insurance companies or policyholders for financial gain, such as by exaggerating claims, staging accidents, or making claims for unoccurred losses. Common types of fraud include internal fraud by insurance company employees and external fraud by agents, intermediaries, or customers. New technologies using machine learning and devices like dash cams can help detect anomalies and reduce fraud, though it remains a significant problem for the insurance industry.

Uploaded by

ADEDEJI MICHEAL
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
78 views

The Problem of Insurance Fraud

Insurance fraud costs billions per year globally. It involves deliberately deceiving insurance companies or policyholders for financial gain, such as by exaggerating claims, staging accidents, or making claims for unoccurred losses. Common types of fraud include internal fraud by insurance company employees and external fraud by agents, intermediaries, or customers. New technologies using machine learning and devices like dash cams can help detect anomalies and reduce fraud, though it remains a significant problem for the insurance industry.

Uploaded by

ADEDEJI MICHEAL
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 10

THE PROBLEM OF INSURANCE FRAUD

MICHEAL ADEYEMI ADEDEJI


August 7, 2021. B.Sc, ACA(Professional).
WHAT IS INSURANCE FRAUD?

Firstly, what is Fraud?


Fraud is the crime of using dishonest methods to take something valuable
from another person. (According to Merriam Webster)
Insurance fraud is a deliberate deception perpetrated against or by an
insurance company or agent for the purpose of financial gain. Fraud may be
committed at different points in the transaction by applicants, policyholders,
third-party claimants, or professionals who provide services to claimants.
Insurance agents and company employees may also commit insurance
fraud.
Common frauds include “padding,” or inflating claims; facts
misrepresentation on an insurance application; submitting claims for injuries
or damage that never occurred; and staging accidents.
FRAUD STATISTICS AND COST OF
INSURANCE FRAUD.
 The FBI estimates that the total cost of insurance fraud (excluding
health insurance) is more than $40 billion per year. Insurance
fraud costs the average U.S. family between $400 and $700 per
year.
 Insurance fraud costs Canadian insurers an estimated $1.3 billion
(cdn.) each year.
 South African short-term insurance industry lost almost R7 billion
to fraud in 2019 according to SA Insurance Crime Bureau.
 In 2020, insurance fraud cost policyholders and insurers around
$739 million in New Zealand according to IFB.
TYPES OF INSURANCE FRAUD

Internal Fraud Intermediary Fraud Customer Fraud

Definition This means fraud against the This means fraud against the This means fraud against
insurer by its Director, Manager or insurer or policy holders by an the insurer in the purchase
any other officer, staff member. agent or any other third-party or execution of an
administrator. insurance product.

Examples • Misappropriating funds. • Non-disclosure or Soft Fraud:


• Fraudulent financial reporting. misrepresentation of risk to • Exaggerating
• Forging signatures and reduce premiums. damages/loss.
stealing money from • Commission fraud – Insuring • Deliberate or subtle
customers’ accounts. non- existent policy holders lagging of claims
while paying premium to resolution.
the insurer.
Hard Fraud:
• Staging the
occurrence of
incidents.
• Medical claims
fraud.
COMMON STAGED CAR ACCIDENTS

1. Swoop and Squat


2. Drive Down
3. Sideswipe
TACKLING INSURANCE FRAUD
HOW TECHNOLOGY CAN HELP TO PREVENT
INSURANCE FRAUD

• Health and auto insurance frauds are the most popular in the insurance industry and in
Africa, health and auto insurance are the most available types of insurance.

• Artificial intelligence and machine learning technologies are developments that many insurers
are leaning towards to help solve this problem. In the health insurance space, a popular form
of machine learning applied is called Anomaly Detection. For example, when a claim is
submitted by a policyholder for a particular procedure done, with anomaly detection, the
system can tell when there are inconsistencies that are typically not associated with the
specific procedure being done, thereby reducing the likelihood of the insurer being overbilled.

• Auto-insurance fraud is a little more complicated, and thus, a lot more technology is invested
into hardware, like dash cams, and telematics devices. To curb the rate of false claims and
inflated claims from vehicle owners, some insurers give significant discounts to policyholders
who opt-in to use such devices.

• With Auto and Health insurance being the most available types of insurance in Africa, the low
insurance penetration could be considered a diamond in the rough as it gives more insurers
the possibility to establish less flawed technologically driven products, services, and
processes as the market for insurance continues to grow.
CONCLUSION

In colossal, insurance fraud is a problem that current


approaches and tools aren’t effectively tackling.
It is becoming an increasingly bigger issue that impacts an
insurance company’s profitability and ability to stay
competitive.
As a result, insurance companies need to embrace innovative
technologies that discover and effectively deal with fraud like
the use of Artificial Intelligence.
QUESTIONS?
THANK YOU!

You might also like