Fighting fraudulent insurance claims during Covid-19

The ongoing global pandemic has caused a major disturbance in our lives with the economic impact quite significant. With a permanent relief from the pandemic not expected anytime soon, one thing that is quite clear is the fact that we all will need to live with the consequences of the outbreak for a considerable time period.

However, something that is even more worrying is that even during these unprecedented times, fraudulent activities continue to remain at their peak. Majorly, with a rapid increase in the number of insurance claims, the fraud teams of the insurers need to deal with a busy workload even while facing the upheaval and disruption.

Rise in number of fraudulent claims

Unfortunately, in the last 6 months, the Covid-19 pandemic has built up an atmosphere under which different people filing for insurance claims face some sort of cheating scopethat can with time lead to a great financial impact for both - insurers and the customers.

Generally, the insurance industry reports that fraud accounts for about 10 per cent of all claims cost however during uncertain times like these, of all the claims reported, around 18 per cent of the claims contain an element of fraud. Some common reasons for a rapid increase in the number of fraudulent activities in the insurance industry is widespread unemployment and economic uncertainty brought in by the coronavirus outbreak.

Types of fraud claims being reported

With financial pressure mounting due to the ongoing COVID-19 pandemic, fraud is something for which entire insurance ecosystem is continually on high alert. In the last 8 months, there has been a rise in the number of fraud claims related to health and term life insurance.

Health Insurance Frauds

While buying a health insurance policy, it is always advised to disclose the pre-existing ailments and serve the mandatory waiting period. Not disclosing pre-existing diseases and filing a claim related for the same condition within 3 – 4 months of buying the policy will result in rejection of the claim and may also be classified under a fraudulent claim. A claim may also be classified under a fraudulent claim and further be rejected if fake/false hospitalisation bills are submitted to take advantage of a particular situation for financial benefit.

Term Life Insurance Frauds

Under term life insurance as well, it is important to disclose your pre-existing critical illness while buying the term policy. If a claim is filed and upon investigation it is revealed that the insured already suffered from a pre-existing critical illness while buying the policy, the claim will be rejected and will be classified under a fraudulent claim. A claim may also be rejected and termed as fraud, if upon investigation it is revealed thata policy was bought in the name of a person who has already passed away.

Role of technology in combating fraudulent claims

The key to detecting fraudulent claims much before the real damage is done is having systems in place to detect anomalies and report suspicious activities at the earliest. This includes being equipped with robust fraud detection tools like automatic monitoring, artificial intelligence, and anomaly detection protocols. During situations like the ongoing pandemic, it is important to have strong Biometric Technologies in place while issuing insurance policies.

Video KYC and digital fingerprinting are two prominent examples of technologies that must be a part of your fraud detection structure. Many insurers have also started using computer vision-based techniques in order to obtain information from images or multi-dimensional data. Over the years, Machine Learning algorithms are also being used increasingly in analysing customer documents for fraud.

The machine learning algorithms have the excellent ability to learn from historical fraud patterns and recognize them in future transactions. The technology appears more effective than humans when it comes to the speed of information processing as it has the ability to find sophisticated fraud traits.

Source: The Economic Times