Each year, fraud costs the Insurance industry about $80 billion, according to the Coalition Against Insurance Fraud. That mind-boggling total is a mere piece of the pie. When you consider fraud’s financial impact on government, health care, retail, the financial services industry, and numerous other sectors, the collective figures are estimated to be as much as $1 trillion in the United States alone. Every industry devotes resources to fraud prevention, but imagine the efficiencies that could be gained from working together in the fraud battle.
A study commissioned by the LexisNexis® Fraud Defense Network shows there is interest in this approach. LexisNexis surveyed 800 fraud mitigation professionals from six different industries about fraud prevention trends and methods. Eighty-four percent of respondents said that data about other fraud cases from within their industry would be valuable in their investigations, and 75 percent said they see value in access to data about cases from industries outside of their own. Additionally, 81 percent of respondents said they would consider contributing the outcomes from their own cases to a central database. Insurance respondents were ahead of most other industry groups in their willingness to both receive data from other industries (79%) and share their outcomes about cases (87%).
Historically, fraud prevention has been relegated to business-, agency- or industry-specific practices. These siloed efforts are limiting because they do not acknowledge fraudsters’ propensity to exploit gaps in the system across industry sectors – a practice that was confirmed by the LexisNexis research. Eighty-four percent of those surveyed indicated that the fraud cases they investigated were also connected to another industry —and 76 percent of these cases had a moderate to high financial impact on organizations.
New Tools in the Fraud Battle
The LexisNexis study not only demonstrated the awareness of the cross-industry nature of fraud, but also highlighted a desire among fraud mitigation professionals to collaborate more broadly to address it. Today, many of us have implemented sophisticated business rules systems designed to detect fraud. More recent technological advancements in big data, predictive analytics and social network graphing are providing even stronger and better tools. But with savvier criminals waging attacks on multiple industries, we clearly need a better approach. The LexisNexis research demonstrated awareness of this challenge, but we need to move from awareness to action. By adopting an approach that uses cross-sector collaboration, industry would have the upper hand, and fraudsters would finally be at a disadvantage.
Tom Kaschalk is a senior partner with Insurance Resources International. He has more than 30 years’ experience with several major P&C insurance carriers, and is a member of the Fraud Defense Network advisory board.