Recovering millions of dollars in fraudulent insurance claims via advanced analytics

The North Carolina Department of Insurance runs its Insurance Crimes Investigation System in the cloud to better detect fraud and track investigations from intake through prosecution

You’ve just arrived at your parents’ house for the weekend. Both retired years ago and enjoy their independence, but you like to help out around house and visit regularly to make sure they’re doing well. On your way in, you collect today’s mail. One of the envelopes catches your attention. It’s an explanation of benefits insurance statement addressed to your mother. But she’s healthy and hasn’t undergone any recent medical procedures. You review the statement together and discover a litany of charges for medical services and equipment – like a wheel chair and oxygen tank – that she hasn’t received, billed by providers she doesn’t recognize. Clearly, something isn’t right.

This example of health insurance fraud happens far too often, with senior citizens the frequent targets of such schemes. Con artists can forge signatures or bribe corrupt doctors to sign documents allowing medical equipment manufacturers and health care providers to bill insurance companies for supplies and services that were not needed or ordered. The end result – fraudsters pocket the money while victims are left with the financial and emotional fallout.

Unfortunately, insurance fraud is an everyday occurrence. With a conservative estimate of 10% of all insurance claims involving some degree of fraud, this deceit amounts to $120 billion lost annually in the US. Sadly, it’s law-abiding citizens who must pay for this deception in the form of higher premiums.

In North Carolina, the Department of Insurance (NC DOI) strives to maintain order within the insurance market and keep costs down. One weapon in this fight is its Criminal Investigation Division (CID) – a fraud unit that conducts criminal investigations and supports prosecution of insurance fraud perpetrators.

But there was just one problem. The CID’s records management system was outdated, complicating investigations and bogging down staff with tedious administrative tasks. The CID needed a fresh approach to records management. That’s when it turned to SAS.

Antiquated manual processes hindered progress

Each year, the CID receives around 5,000 tips of suspected insurance fraud. But not every “intake” – as they’re called – becomes a case. Part of the CID’s job is to triage intakes to determine which are most likely to result in prosecution, and route these cases to the appropriate district.

Previously, a CID supervisor had to manually review and route all of these intakes. For Chet Effler, Division Chief for the CID, this slowed things down – as did the need for officials to manually perform all investigation, casework and prosecution work.

“Cases would go into a repository that wasn’t designed for law enforcement and certainly wasn’t designed for investigative records management,” Effler says. “We were just depositing information and couldn’t really do any analysis on it. It wasn’t even reliable for searches because the data was so unstructured.”

The end of the month brought another set of challenges for the CID. Each month, investigators had to report on performance metrics, such as number of cases and number of arrests. With an average case file size of 2,000 pages, it often took investigators three days to fulfill their reporting requirements.

“Our process created mountains of paperwork and obstacles to show our success,” Effler explains. “Investigators were spending too much time in Excel and not enough time fighting fraud.”

Building a new system from scratch

As part of a CID expansion project, technology became a focus. Specifically, how a new system could deliver on all requirements.

This is where Marty Sumner, Senior Deputy Commissioner at the Department of Insurance, enters the story. Tasked with finding a new system, Sumner turned to the state’s Government Data Analytics Center (GDAC) for guidance. The GDAC keeps a bird’s-eye view on government systems to help agencies exploit existing data assets. The GDAC referred Sumner to SAS.

“I looked at different products on the market, and SAS seemed to be most tailored toward investigations rather than just police records management,” Sumner says. “I reached out to SAS, and they were extraordinarily receptive. They have the reputation as a high-level company with a lot of security knowledge, but it was their customer service that impressed me most.”

Sumner and his team knew an off-the-shelf solution wouldn’t suffice. They needed a bespoke system to meet the needs of everyone in the division – from managers to investigators to prosecutors. After a collaborative planning process with experts from the CID and SAS, the new system was born.

A better way to investigate and prosecute insurance fraud

The CID established the Insurance Crimes Investigation System (ICIS) to better investigate and prosecute insurance fraud. The system uses SAS Visual Investigator and SAS Visual Analytics to support data intake and operational case management, giving users the ability to track investigations from intake through prosecution. They now can monitor trends in real time, search and retrieve information, conduct link analysis and investigate every case that comes in.

Fraud tips are submitted through a user-friendly online interface, where an algorithm instantly routes them to the appropriate district, saving time. Now the average case hits an investigator’s inbox within 24 hours of submission.

“SAS Visual Investigator is how we manage cases now,” Effler says. “In addition to tracking, it’s where we put our evidence and where we put our regulatory requests to companies. It’s a complete housing of every piece of an investigation. Meanwhile, SAS Visual Analytics is where administrators and people like me go in to analyze workload demographics, where things are and how we’re responding.”

“The ICIS system is designed specifically for what we need, from start to finish,” adds Kristen Mercer, District Commander for the CID. “When the data comes in, it immediately goes to the correct district and the correct supervisor. It makes my job much more efficient because all the relevant intakes come to me, and I don’t have to weed through cases to figure out which ones are for my agents.”

In one click, Mercer can assign cases to investigators. From there, the ICIS stores every piece of information about a case – every interview, every piece of evidence, every document. This becomes the single source of the truth.

SAS Visual Investigator enables users to find hidden connections, as with a staged automobile accident ring, for example. By clicking the network tab, investigators can see how different cases may be linked to each other via common addresses, phone numbers, emails and other variables that might escape the human eye.

“This is critical because most fraud is not individualized,” Mercer says. “SAS Visual Investigator allows us to link cases together so we can stop the fraud at its source.”

Getting a clear picture with visual analytics

Another valuable feature of the ICIS is the ability to see trends. This is especially useful in a state like North Carolina, where hurricanes can bring about a flurry of property insurance claims in a short period of time. When natural disasters hit, criminals aren’t far behind.

“SAS Visual Analytics helps us identify and track ‘hot spots’ or fraud ring operations in both urban and rural areas of North Carolina, because a lot of times they blend together,” Effler says.

So when predatory contractors come knocking, CID investigators can link potentially fraudulent claims in real time, and isolate the type of cases they want to review.

SAS Visual Analytics also helps streamline reporting. In the past, it used to take investigators several days to manually compile reports each month. Now managers can generate their own reports in as little as seven minutes.

“This gives agents more freedom to concentrate on what the state of North Carolina wants them to concentrate on, which is arresting suspects on insurance fraud charges,” says Mercer. “One of the system’s biggest strengths is that we can easily pull data to show the benefits of having it and how our work is making an impact.”

Recovering $6.9 million in seven months

Productivity gains and better visibility into the agency’s performance have led to some remarkable results.

Prior to the ICIS, investigators hovered around a 60% success rate in complying with case deadlines. With the new system, that number jumped to 98.7%. Because of this efficiency boost, the average case resolution time has dropped from 90 days to 57, allowing the CID to investigate more cases.

“Just seven months after implementing the ICIS, we recovered $6.9 million for the consumers of North Carolina,” Effler says. “That result shows the success of the program and how operationally sound it has made our field case investigations and agents and operations as a whole.”

Easy access with the cloud

By hosting the ICIS in the cloud, CID employees get safe and secure access to case records wherever the internet is available. This has been especially useful during the COVID-19 pandemic, when agents were spread out across the state, working remotely, primarily by phone.

“While having access to our files is critical, so is the security of those files,” Effler says. “SAS helps us comply with government security measures, while still giving us the access we need.”

Aside from easy access, a good user experience is another reason for the system’s popularity. “One of the things I like most about the platform is how easy it is,” Sumner says. “You don’t need extensive training to use it. People can just find what they need without being everyday users.”

In fact, Sumner says everything about the move to the ICIS has been easy.

“SAS did a miraculous job to fully analyze our needs, put together a great team and deliver the system we dreamed for,” he says. “You can spend years implementing a new system like this, but SAS did it in months and made it look easy.”

Additional benefits from the cloud include:

• Single provider to engage: When companies or organizations run and manage environments themselves, they have multiple vendors providing separate service-level agreements. They also have different departments supporting the environments. With the cloud, the NC DOI has one service-level agreement and a single organization to engage with, ensuring incidents are resolved quicker.
• Greater agility: The NC DOI benefits from SAS optimizing and managing its SAS environment in the cloud. The agency has easy access to SAS expertise through operational teams, customer liaisons and technical account managers.
• High availability: With a service-level agreement of 99% combined with the best SAS talent, the NC DOI has a resilient, highly available analytics environment that drives productivity and reduces risk for critical processes.

Curious about the future

For Sumner, curiosity has been the through line since day one.

“We started by asking ourselves three questions,” he says. “What do we know now? What do we need to know? And how can we get that?”

These questions guided the development of the ICIS. Now that it’s in place, Sumner’s curiosity has shifted to learning about the real costs of insurance fraud in North Carolina. Not just the monetary loss, but the social costs as well. To uncover that insight, Sumner plans to integrate data from insurance companies and other agencies to gain a more complete view of the impact of insurance fraud in the state.

Meanwhile, Effler and his team recently used the ICIS to uncover a new type of fraud with nationwide implications.

“We know that fraud isn’t just a North Carolina problem – it’s a national problem,” Effler says. “We’re now bringing in the US Attorney’s Office and private companies around the country to expose the impact of this particular case. None of this would be possible without SAS.”