Search
Close this search box.

‘Growing appetite’ to tackle insurance fraud, but challenges are evolving

ruck (20)

‘Growing appetite’ to tackle insurance fraud, but challenges are evolving

Why insurance organizations should “think global, not local”

There is a growing appetite among insurers to tackle claims fraud more comprehensively. At the same time, fraudsters are ramping up their strategies and targeting markets beyond the US and UK, posing huge risks to insurers operating globally.

That’s according to Steve Crystal (pictured), head of claims fraud and investigation services, international at Sedgwick, who spoke to insurance leaders and anti-fraud professionals at last week’s Insurance Innovators Fraud & Claims summit in London.

“The rest of the world has noticeably been waking up to the risk posed by insurance fraud over the last five years,” Crystal said.

“There is definitely a growing appetite to tackle insurance fraud, not just by those insurers that operate internationally, but also by those insurers who operate only in the local markets.”

Claims fraud evolving as criminals find new targets

According to the Coalition Against Insurance Fraud (CAIF), insurers make around $308 billion in fraud claims payments annually in the US alone, making the country one of the biggest markets for fraudsters.

But Crystal noted that other fraud hotspots are emerging worldwide, such as South Africa and France.

Additionally, organized crime groups are targeting product lines beyond auto insurance. The emergence of embedded insurance has also given fraudsters a new avenue to target insurers.

Finally, Crystal named the rise of generative artificial intelligence (AI) as a potent threat. A notable case of claims fraud last year, for instance, stemmed from convincing fake boarding passes from a series of organized lost luggage claims between the US and the Dominican Republic costing around £1,500 ($1,900) each.

AI tools have made fraud easier and more accessible than ever, necessitating collective action from the industry, Crystal warned.

“I have seen some really good fake documents, photos and videos all around the world, incredible hologram foil strips on documents in real life,” said Crystal.

“But there is an opportunity to fight back against these challenges through global education, cooperation and disruption.”

“Think global, act local” – a strategy for tackling insurance fraud

Addressing insurance industry stakeholders, Crystal shared his strategy for helping new markets tackle fraud as insurers seek to protect their reputations, retain genuine customers, and plug revenue leaks.

“It’s advisable to be flexible [and] deliver a strategy that fits globally,” said Crystal.

He recommended a process centered on detection (spotting potentially fraudulent insurance claims from portfolios) and containment (triaging and investigating suspicious claims). Insurance organizations must be accountable at all steps.

Finally, Crystal stressed the importance of a “top-down culture” when it comes to eliminating claims fraud.

“It’s got to be lived and breathed from the very top. Let’s do the right thing,” he said. “Do provide colleagues who are new to this area with in-country support when it’s relevant to do so, especially around coaching.

“And in the market, build partnerships, make affiliations, and develop intelligence and explore technology.”

Crystal underscored the importance of collaboration and information-sharing in the war against fraud, advocating for a united front against organized crime networks.

He also highlighted the role of technology in enhancing fraud detection and prevention efforts, urging insurers to leverage innovative solutions to stay ahead of fraudsters.

“There were different challenges [affecting anti-fraud efforts], including legislation, regulation, data protection, market approach, policy wordings, culture, and language,” Crystal said.

“But my experience is that today, despite these challenges, there is a common denominator. Whatever your language, claims fraud is seen internationally as bad news, and I think that’s good news for our industry.

What are your thoughts on the claims fraud landscape? Feel free to share your comments below.

Leave a Reply

Your email address will not be published. Required fields are marked *

Related posts

Insurance-technology

Specific Technologies Driving Insurtech Investment in 2024

Understanding the Funding Decline The decrease in funding does not necessarily spell trouble for the insurance sector but instead highlights a strategic shift, the report suggests. “The insurance industry, like many sectors, is focusing on the most promising ventures with substantial insurance potential,” the report explains. “Insurers are directing their investments toward key areas and current trends such as embedded insurance, employee benefits, and cyber risk management. This strategic investment approach signals a forward-looking mindset within the industry.” Three Key Insurtech Trends for 2024 The report identifies three major trends shaping insurtech investments in 2024: Public Insurtech Companies: Financial and Growth Strategies The report also notes that public insurtech companies are prioritizing revenue growth as their main goal. These firms are restructuring their financial strategies to boost cash flow and capitalize on rising revenue streams. Their growth prospects are supported by expanding asset portfolios and strong market demand. “Public insurtech companies are focusing on revenue growth and optimizing their financial frameworks to increase cash flow,” the report states. “The growth potential for these companies is driven by increasing revenue opportunities, broadening asset bases, and a robust market for their services.” In summary, while global insurtech funding saw a decline in 2023, the industry’s focus on GenAI, digital process management, and connected insurance technologies is setting the stage for a dynamic and forward-looking 2024.

Read More
Business

Insurer Secures Unanimous Supreme Court Victory in New York Choice of Law Dispute

In the world of sports, a clean sweep, a shutout, or a perfect game is the ultimate achievement. In the legal arena, a unanimous decision from the U.S. Supreme Court is equally rare and significant. In a notable legal triumph, Great Lakes Insurance SE achieved a unanimous 9-0 victory in the Supreme Court on February 21, 2024. This victory follows a protracted legal battle that began in the District Court of Pennsylvania, advanced to the U.S. Court of Appeals for the Third Circuit, and culminated in the Supreme Court’s decisive ruling. Background of the Case: Great Lakes Insurance SE v. Raiders Retreat Realty Company The heart of the dispute was the insurance contract’s clause selecting New York law to govern any future legal conflicts. Although the financial implications of this case were relatively minor compared to the broader marine insurance industry, the insurer’s determination to uphold a crucial maritime legal principle has significant long-term implications for marine insurance. Faced with the insured’s counterclaims—including allegations of breach of fiduciary duty, insurance bad faith, and violations of Pennsylvania’s Unfair Trade Practices Law—the insurer was confronted with serious risks. Such claims could lead to the shifting of attorney’s fees, treble damages, and more, which might normally encourage insurers to settle rather than risk pursuing justice. However, Great Lakes Insurance, supported by The Goldman Maritime Law Group, opted to challenge the Third Circuit’s decision and seek clarity from the Supreme Court. Supreme Court Ruling: A Landmark Decision In a landmark ruling, Justice Brett Kavanaugh affirmed that choice of law provisions in maritime contracts should be upheld by default. This ruling is a major victory for establishing a consistent federal standard in maritime law and avoiding a patchwork of state laws that could complicate marine insurance disputes. The Supreme Court’s decision overturned the Third Circuit’s earlier judgment, which had questioned whether Pennsylvania’s public policy concerns might override the insurance contract’s choice of New York law. By upholding the New York choice of law clause, the Supreme Court eliminated the extra-contractual bad faith claims under Pennsylvania law, thereby ensuring that the dispute could be resolved based on the merits of the insurance claim itself. Significance of the Supreme Court’s Decision This ruling represents a significant advancement in maritime law, affirming that choice of law clauses in maritime contracts are generally enforceable. The decision establishes a clear, uniform legal framework for resolving maritime contract disputes, which will streamline the process and ensure fair adjudication of future insurance claims. Justice Clarence Thomas’s concurring opinion was particularly notable for its criticism of the 1955 Wilburn Boat v. Fireman’s Fund Insurance decision, which had previously influenced maritime insurance law. Thomas argued that Wilburn Boat was incorrectly decided and stressed that a uniform and enforceable set of rules is essential for the development of maritime law. Impact on the Marine Insurance Industry The Supreme Court’s decision sets a “bright-line” rule affirming that choice of law clauses are valid unless there is a strong argument against the selected jurisdiction. By endorsing New York’s insurance laws as a reasonable choice, the ruling supports a more consistent and predictable legal environment for marine insurers. This decision represents a major step forward in maritime law, helping insurers better assess risks, determine premiums, and ensure fair and efficient resolution of maritime insurance disputes.

Read More
Try your instant quote