FRISS: Uncovering insurance fraudsters

18 May 2017 —
FRISS: Uncovering insurance fraudsters
If you compare the insurance fraud business to other types of business, it pays off to commit insurance fraud. The benefits are great, the chances of being caught are low, and the sanctions you get once caught are low as well. So, whether working in the claims, financial, underwriting or SIU department; you will all deal with fraud at some point. And it does not stop at an organization or a border. Fraudsters do market research. They use different modus operandi, use different insurers, fake identities; just to make sure that they don't get caught.

Fraud is harmful too. It slows legitimate claims, increases premiums and can put innocent victims in danger. Society carries the burden of the results, regardless the magnitude. The following story shows how fraud comes into existence.

Matteo from Malta

A fraud ring is not born overnight. The case of the Malta fraudsters very likely started with one valid claim between an islander and a tourist with a rental car. The accident luckily only caused material damage, the tourist was the guilty party and the insurance company had its administrative processes in order. In short: an easy case.

The Maltese man, we will call him Matteo, files a claim but does not get the damage fixed. Instead he pockets the money from the cash settlement claims. He tells a friend, who is attracted by the easy money and suggests that they stage a new, similar accident. They choose a different insurance company and the second claim is also paid. Suddenly, Matteo and his friend have lots of easy money to spend and other people are starting to notice. This is how a network of friends and acquaintances comes into being, consisting of people who bump into each other's vehicles using rental cars to cash in on fake claims. Accidents are staged and several people claim the same damage over and over, at multiple insurers.

The amounts rose and even soar to a fictional total-loss worth of € 27,000. As often is the case with such events, it escalates rather quickly. That is why this fraud ring got noticed by a claim handler who saw a pattern. The network was detected after several insurance companies combined forces. They handed over the case to the police and measures were taken to stop this fraud ring.

Catch and cure

It would be hard to imagine a world where everybody colors between the lines. People like Matteo do not necessarily want to be or become a fraudster. The occasion might just feel right, pressure to keep up appearances is high or the profits gained are easily reached.

Insurance fraud must be taken seriously. Legitimate claims should be treated accurately, premiums should be honest and neither of us would like to see an increase in innocent victims. Therefore, it is important to first identify and catch the fraudsters, only then to cure their damage. Follow a fraudster's thoughts in order to reveal him or her. Level with the customer but think like the fraudster.

Learn more? Download this free ebook in which various fraud types are explained through real-life examples: