During ˿ƵAPP’s 11th annual fraud conference, industry insiders provided their valuable insights into this persistent concern. This article offers a summary of the virtual event, with key insights and top action items from each session, designed to empower the insurance industry to identify and combat fraudulent activity.
Fraud has evolved into a sophisticated and pervasive threat, impacting individuals, businesses, and governments worldwide.
Recently, ˿ƵAPP hosted its 11th annual fraud conference, where thousands of insurance professionals joined virtually to hear industry leaders, law enforcement officials, and fraud experts share their insights and strategies for combatting this ever-evolving menace. Below are some of the key takeaways and actionable items.
Presented by: Phil Benvenuti, Vice President - Internal Audit, Pegasystems
Summarized by: Lawrence Ryan, Vice President of Group Re Operations, ˿ƵAPP
It is critically important to maintain professional skepticism during fraud investigations, including cultivating a questioning mindset and critically assessing all evidence.
Insurers should always "trust, but verify," highlighting that verification is the key to gathering sufficient evidence while also consistently maintaining objectivity.
When gathering information about a claim involving possible fraud, “Don’t be satisfied until you are satisfied.”
Presented by: John Chalfant, Senior Manager of Product Management, LexisNexis Risk Solutions
Summarized by: Jennifer Johnson, Vice President, Underwriting Innovation, ˿ƵAPP
It is vital to keep uniformity across the data sets to ensure better insights. It should be noted that problems can occur when data sets are not cleansed, linked, and maintained. The benefits of quality management include reduced costs, time savings, lower security risks, transformational improvements, complete reviews, and universal identification.
Insurers should monitor their data sets continually. Review claims first to determine what data is available, remembering that a single source is insufficient to overcome inaccuracies.
“Fraud solutions are only as good as the data going into them.”
Presented by: Timothy Reboulet, Senior Special Agent (retired), United States Secret Service; Director of Safety and Security, Ladue School District (St. Louis, MO)
Summarized by: Jennifer Johnson, Vice President, Underwriting Innovation, ˿ƵAPP
BlackCat/ransomware generally favors phishing emails to gain access to the target environment. It generally takes 277 days to identify and contain a data breach; meanwhile, ransomware hackers can obtain data in as quickly as five hours and can encrypt an entire system in less than four days. The average total cost of a data breach in the financial sector, including downtime and legal proceedings, is $5.72 million.
The best security practice to thwart the threat of fraud is to implement the five D’s: detect, deny, delay, deter, and defend. Insurers should encourage consumers to utilize multifactor authentication when available and regularly update passwords at least once per quarter.
“Never negotiate with or pay terrorists, and these ransomware attackers are terrorists.”
Presented by: Francis X. Sztuk, Senior Vice President, Investigative Services, Delta Group
Summarized by: Danielle Storts, Director and Team Manager, US Individual Life, ˿ƵAPP
Fraud/unethical behavior has become more acceptable over time to a striking degree. The percentage of people who thought certain unethical behavior was acceptable increased 6-9% from 2007-2017, depending on the category. The largest change occurred in underwriting fraud, where 91% of people thought it was unacceptable in 2007, while only 82% felt that way 10 years later.
It is important to remember that, throughout the insurance process, every touchpoint is a time to conduct an interview/Q&A session.
"The decline in social ethics over the last 30-40 years makes people much more apt to commit fraud than ever before."
Presented and summarized by: Philip Thomas, Executive Director, Global Claims, Governance & Reporting, ˿ƵAPP
It was interesting to find that claims fraud exists, to varying degrees, in all markets, and to discover the lengths to which insurers are going to identify and prevent fraud, including the application of expert systems and machine learning. Although the need for robust fraud prevention is clear, insurers also have a responsibility of working with policyholders, including the time associated with settling claims.
Insurers need to review current claims fraud processes to identify areas where improvement can be made and to determine what technology investments may be needed to achieve the best outcome.
“The fraudsters aren’t going to stop, so we have to do what we can to keep pace with them.”
Presented by: Ernest Patrick Smith, Managing Partner, Nawrocki Smith, LLP
Summarized by: Karen Riendeau, Senior Technical Claims Consultant, US Individual Life, ˿ƵAPP
Forensic accounting encompasses accounting, auditing, and investigation skills that look beyond the numbers to deal with the business reality of a situation. When trying to identify fraud, it is important to study the numbers, look for unusual trends, and analyze them for fraud. Everyone is their own bookkeeper and can readily adjust the numbers to their advantage.
Disability fraud is one of the most common forms of insurance fraud, so look for trends on feign (not genuine) or pretend illnesses or injury. Also keep an eye out for manipulation or falsifying of financial/production documentation, such as financial returns, both business (if self-employed) and personal, plus all statements related to tax returns and the general ledger of the insured or small business.
“It’s all about the trends; history repeats.”
Presented by: Julianne Callaway, Vice President and Senior Actuary, Strategic Research, ˿ƵAPP
Summarized by: Colin DeForge, Vice President, Underwriting, US Underwriting and US Individual Life, ˿ƵAPP
Among all types of insurance, life insurers are the hardest hit by fraud, misrepresentation, and anti-selection – to the tune of around $75 billion annually. This cost is ultimately passed along to consumers in the form of higher premiums.
As an industry, we should act together to combat fraud by sharing trends and critical data. The need for more robust tools to detect and deter fraud and anti-selection is more critical now than it has ever been, especially as technology becomes more readily available to bad actors.
“Anti-selection hinders insurance innovation, increases the price consumers pay, and reduces the insurer’s profits.”
Presented by: Paul Marquez, Vice President, Diligence International Group
Summarized by: Colin DeForge, Vice President, Underwriting, US Underwriting and US Individual Life
While fraud was on everyone’s radar in the past, COVID-19 was a jumping off point for many fraudsters, especially by exploiting newer underwriting techniques, such as acceleration and fluidless underwriting. This has been further enabled with the expansion of technology. While the insurance industry may be restrained by regulations around the use of AI and technology, fraudsters are operating freely without roadblocks.
Fraudsters are actively increasing their utilization of AI and other technology. As an industry, we must endeavor to at least keep up with them, if not stay ahead.
“Fraudsters have their own playbook and are not encumbered by morals, rules, or regulations.”
Presented by: Abigail Bishop, Head of External Relations, Scam Prevention, Amazon
Summarized by: Danielle Storts, Director and Team Manager, US Individual Life, ˿ƵAPP
As someone who uses Amazon on a weekly basis, I did not realize how invested that company is in actively pursuing and shutting down phishing websites and phone numbers.
Businesses and consumers need to start paying more attention to ensure the “Amazon” emails and contacts they receive are really from Amazon and not merely a scam.
"We have referred hundreds of bad actors to law enforcement that have led to arrests. We are working with an approach that is to stop scammers before they even reach the customers."
