In the midst of the National Football League regular season play, Enservio has made a hard tackle on soft fraud with its ContentsAnalyzer software. Consider soft fraud that elusive offensive player that’s hard to bring down. Having ContentsAnalyzer is like having an extra defensive player on the field.
Soft fraud vs. hard fraud
In the world of insurance ‘hard fraud’ is committed by sophisticated professional criminals who find ways to manipulate the insurance system and reap monies fraudulently. ‘Soft fraud’ is opportunistic, committed mostly by normally honest consumers who see the opportunity to either ‘pad’ a legitimate insurance claim or submit a fraudulent household claim.
Soft fraud – hard to get a grip on it
The role of the Special Investigation Unit (SIU) at an insurance carrier is to make a ‘clean tackle’ — stop fraud, improve efficiencies, pursue fairness and justice and support the overall claim process by ensuring the customer is paid the right amount. While SIU directors are expected to achieve these goals, they are expected to do so while avoiding any negative impact to customer satisfaction.
One problem with soft fraud is that it’s difficult to disprove claims without alienating customers. As is often the case, when investigators get suspicious and start probing with questions, policyholders may take offense and find a justifiable excuse to jump to another insurer.
Beyond the service issue, SIUs wrestle every day with the risk/reward formula. Do they risk devoting time and resources to a claim, and possibly losing a customer, just to save a few hundred dollars?
Tools that, by themselves, have failed to tackle soft fraud
Many commercial tools focus on profiling policyholders and alert on criteria such as credit score and other personal risk factors. While this information is useful, it’s not a complete picture of insurance claims as it doesn’t look at line-item claim details.
Another common approach is the use of business rules and algorithms that set up certain threshold values. Suspicious activity is flagged if a certain threshold is exceeded. The drawback to behavior-based fraud systems is that they can generate too many alerts, increasing the percentage of false positives.
Examining claim line detail, ContentsAnalyzer helps to identify suspicious activity
Until now, fraud tools have been incapable of flagging claimed items with values that exceed market benchmarks. For example, a $50 coffee maker claimed at an inflated value of $500 would not have been flagged in the past.
ContentsAnalyzer examines claim line detail in real-time, comparing and contrasting pricing data for signs of exaggerated or padded claim values that may point to soft fraud. It’s also smart enough to monitor for these anomalies during the claims process.
For more insight on this topic please see “The Hard Problem of Soft Fraud” article just published in PropertyCasualty360.