Study: More insurers adopt advanced analytics to combat growing insurance fraud

Predictive analytics tops list of new insurer tech use, AI gains traction

Traditional anti-fraud technology tools are giving way to advanced analytics as insurance fraud rises, insurers say in a study of insurtech trends.

The biennial study was conducted by the Coalition Against Insurance Fraud, assisted by the analytics firm SAS. Some 84 insurers took part.

Fraud has risen over the last three years, about two-thirds of insurers say in the State of Insurance Fraud Technology. In response, insurers plan to retool their anti-fraud arsenals with a mix of advanced analytics over the next two years:

• Predictive analytics tops the list. Some 64 percent of insurers say they’ll earmark funds for predictive tools. That’s a 45-point spike from 2016, when just 19 percent planned to invest.
• Planned investment in link and social media analysis also has grown rapidly, say 43 percent of insurers vs. only 16 percent in 2016.
• New on the list: One in five insurers (21 percent) plan to invest in artificial intelligence (AI) in the next 12-24 months.

"Technology is rapidly entering a new era of higher IQ and ability to meet fraud threats that are growing in scale and complexity,” said Dennis Jay, executive director of the Coalition.

“Advanced analytics eclipsing investment in old-school technology signals an industry momentum shift,” said David Hartley, director of insurance solutions at SAS. “Capabilities like predictive analytics, machine learning and AI deliver much deeper insights than business rules alone.”

Other notable findings:

          Types of technology. Automated red flags and business rules remain popular, yet are fading. Predictive analysis, exception reporting, text mining, link analysis and AI are gaining traction.

          Tech tools expanding. More insurers have expanded their range of anti-fraud tools — and their ability to detect and investigate fraud. More players are entering the field with new products and services. Access to vastly more public and private data has grown, as well. Some tech costs also have declined with increased competition.

          Technology uses. Detecting claims fraud remains the top use of anti-fraud technology, 90 percent of insurers report. Detecting cybercrime also is rising.

          Building, maintaining systems. Insurers increasingly are hiring tech consulting firms to build and maintain their anti-fraud systems, the study shows. This coincides with more third-party system providers coming online and prices dropping.

          Data sources. Use of unstructured data is increasing as insurers adopt newer tools to cull for evidence.

          Referrals from tech. More insurers favor quality of case referrals their systems generate over quantity. The percent of fraud referrals insurers receive from their systems has stayed steady.

          Challenges. Three of four insurers say that integrating data and poor data quality are some of their biggest system challenges. Lack of IT resources also is a problem.