There is a critical balance that needs to be attained between combating fraud across the lifecycle of a policy, and providing a positive customer experience at all times.
Both are essential and yet made more difficult by the fact that insurance fraud in particular is not just growing, it is doing so faster than ever before. Indeed, there are 10 000 fraud rings currently operating in the United States alone, costing its economy a staggering $40 billion every year due to non-health insurance related incidents.
While it may be tempting to lump insurance fraud under one broad umbrella, there are actually two different types of fraudulent activity. The first of these is soft fraud, which tends to be opportunistic in nature, involving claimants who will pad an otherwise legitimate claim.
This can range from hiding a deductible to running up medical bills in hopes of inflating pain and suffering awards. In some cases, claimants will go so far as to obtain needless surgeries in order to maximise the value of their claim.
The second type of fraud, called hard fraud, involves the staging of an accident or other form of a claim. It is intentional and well planned, and most alarmingly, often has connections to organised crime.
For those who think insurance fraud is relatively harmless as compared with more serious crimes, this needs to be viewed in context. At present, insurance fraud counts as the largest criminal enterprise in the United States after drug trafficking. No less important to note is that fraud not only affects insurers, it also has a deleterious impact on honest customers as well, as it slows down legitimate insurance claims and increases premiums for all.
Lives and livelihoods
In the case of auto insurance claims, it can go so far as to jeopardise innocent people’s lives, due to fraudsters staging or even inducing accidents. As if this wasn’t enough, fraudsters are not only becoming more extreme by staging deaths, but also more innovative. For example, there are now crash-and-buy scams, in which insurance policies are purchased after a crash, and ‘ghost brokers’ who trick young drivers by selling false policies online, over the telephone, and even in person.
Clearly, fraud is a pressing issue that demands a serious response, as it needs to be caught and addressed at every turn. However, being thorough in checking claims so as to mitigate against fraud needs to be balanced with being customer centric, in order to remain competitive.
While great service is always a terrific differentiator between two suppliers irrespective of industry, there is another reason why insurance companies need to keep it a high priority. It has been proven that insurance companies that can offer customers a superlative experience when signing on for new policies not only have better retention, but also have to contend with less new customers ‘shopping’, or going to their competitors for alternative offers.
Thus, for an insurance company today, neither the critical imperative of combating fraud nor the need for providing flawless customer service can afford to be ignored.
About TransUnion (NYSE: TRU)
Information is a powerful thing. At TransUnion, we realise that. We are dedicated to finding innovative ways information can be used to help individuals make better and smarter decisions.
We help uncover unique stories, trends and insights behind each data point, using historical information as well as alternative data sources. This allows a variety of markets and businesses to better manage risk and consumers to better manage their credit, personal information and identity. Today, TransUnion has a global presence in more than 30 countries and a leading presence in several international markets across North America, Africa, Latin America and Asia. Through the power of information, TransUnion is working to build stronger economies and families and safer communities worldwide.
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Senior Director, Insurance Business Development at TransUnion
Tel: 011 214 6000