Report: Workers' comp is larger fraud area for property/casualty industry
The report from Deloitte Consulting says while many companies are increasingly trying to address the issue of fraud they are by and large taking a fragmented approach. Instead, an integrated approach with "an end-to-end vision of the fraud management process" is needed.
"An effective operating model supports implementation of a fraud management strategy," the report says. "Access to consistent, high-quality data and the latest tools and analytics provides the opportunity for an operating model to reach its full potential."
Insurance fraud is defined as "a deliberate deception perpetrated against or by an insurance company or agent for the purpose of financial gain." It costs P&C insurers an estimated $30 billion per year and continues to grow.
Soft fraud represents the lion's share of fraud in the property/casualty industry, according to the report. Instead of deliberately faking a claim, more fraud incidents involve claimants exaggerating the value of a legitimate claim or misrepresenting information in an effort to pay lower policy premiums.
The lack of a collective industry approach, limited legal options, problems with legacy systems and data quality, the ongoing talent crisis, and what it calls "tolerant attitudes" among consumers are identified as barriers to addressing insurance fraud.
What's needed is an integrated approach that requires companies to:
- Develop a fraud management strategy.
- Align the operating model.
- Improve information quality.
- Leverage advanced technology tools and analytics.
"These four pillars encompass a strategy that clearly articulates fraud management goals; the organizational structure, business processes, and workforce skills required to execute that strategy; the ability to integrate quality internal and external information; and the tools to promptly identify fraud," the report says.
With many companies increasing the workloads of their claims adjusters and minimizing their special investigative units, it has become more difficult to address fraud. "Today, more companies are coming to realize that it may be necessary to hire additional staff and bring their SIU back in house if they are to proactively address fraud," the report says.
Read more at the WorkersComp Forum homepage.
September 6, 2012
Copyright 2012© LRP Publications