Are insurtechs overlooking the basics of fraud detection?

While insurance companies are increasingly concerned about emerging fraud challenges in the digital space, an industry expert suggests they focus more on the basics for now.

“We have not found that there’s a significant problem yet. There could be in the future. I don't doubt that, but what we have found is that the traditional forms of fraud — things like exaggerating an injury or saying you’re injured when you really are not — are still so much more prevalent than these potential future threats,” Tom Rasmussen, VP, Claims Solutions, Carpe Data, said.

Carpe Data is in the business of leveraging technology to fight insurance fraud, an ongoing, billion-dollar problem that Rasmussen only expects to get worse in the current economic climate. His company has developed a solution that utilizes data and AI to detect potential fraud on insurance claims and automatically generate alerts for the carrier.

Rasmussen acknowledged the importance of insurers keeping abreast of emerging threats such as deepfake fraud. He said it is prudent for insurers to protect themselves, but underscored the need for basic fraud guards — which a surprising amount of carriers are allegedly failing to perform.

“There’s a lot of talk about AI-generated deepfakes and all these other really scary things that could be out there with all the new technology and AI-powered technology. But, at the end of the day, there is just a lot of basic claims-handling-101 type of stuff that a lot of carriers just aren’t doing,” he said.

Anti-fraud measures lacking

Rasmussen said some carriers are mostly relying on their staff’s intuition to detect fraud, while others are using predictive modeling.

Other carriers have turned to technology for their anti-fraud solutions. Rasmussen said that, in one instance, a Carpe Data client found seven percent of their injury claims were flagged as needing investigation.

However, Rasmussen said he also engaged with carriers who neglect to perform any proactive anti-fraud measures. He said that many insurtechs are undergoing operational changes during a period some experts are calling the “second wave” as startups pivot from industry disruption to collaboration with carriers.

Jumping the gun

Rasmussen believes while digital forms of fraud could become more of a threat in the future, they have not reached prominence just yet.

He noted that he recently sat on a panel with three other leaders to discuss AI deepfakes, manipulation of people’s voices and being able to replicate that and similar emerging threats.

“When I asked for specific examples where this has happened in your organization, none of them had an example,” he said.

This could be due to two reasons, he added: either the companies did not have the tools to detect cyber threats, or bad actors simply “don’t need to go to that extreme measure” when the absence of basic guards make traditional insurance fraud “still so easy for them.”

According to Rasmussen, Carpe Data has developed the ability to detect digital fraud such as deepfakes. But the company has “not found the need yet to really invest heavily there.”

“I think it is an emerging problem, and it’s probably more specific to maybe a certain line of business that’s being sold. But I would say, at this point, we have a lot of just basic blocking and tackling that we need to do in the industry,” he said.

Keeping your foot on the anti-fraud pedal

For carriers concerned about emerging fraud challenges, Rasmussen agreed it is vital to consider future risks, stress test systems early, and have the ability to flag options.

For instance, he suggested insurtechs may consider having triggers in place to perform certain anti-fraud tasks the “old school” way in certain instances. “There’s a lot of opportunity to find and detect more fraud that, unfortunately, just drives costs up for the end consumer,” he said.

“This problem is something that we just need to continue to address, try to get better at and just not take your foot off the gas on this type of strategy to combat fraud,” he said.

Carpe Data is a California-based data company founded in 2016. It works with over 40 global insurance carriers, including several of the top 10 in the United States.

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Rayne Morgan is a journalist, copywriter, and editor with over 10 years' combined experience in digital content and print media. You can reach her at rayne.morgan@innfeedback.com.