Experts from SAS, Manulife offer insights on proactive insurance fraud prevention

Digital transformation may create new opportunities for fraudsters but it also empowers insurers with AI, data analytics, and other tools.

As the insurance industry navigates the complexities of digital transformation and evolving fraud tactics, leveraging advanced technologies becomes crucial to combatting fraud. By embracing new tech innovations, insurers can build a more secure and efficient ecosystem for both themselves and their customers.

Industry experts Eduard Sargsyan, Head of Insurance Business Advisory (Asia Pacific and Emerging EMEA) at SAS Institute, and Brian Wu, Director and Anti-Fraud Officer, Asia Segment at Manulife, will share their insights on enhancing fraud prevention strategies amidst the evolving digital landscape.

Digital technologies in combatting insurance fraud

Sargsyan, with his extensive background in digital transformation for insurers, emphasised the pivotal role of digital technologies in evolving from reactive detection to proactive prevention.

Initially, insurers transitioned from manual and labour-intensive fraud detection processes to basic automation. However, today's challenge is to transition from a reactive detection mode to a proactive prevention approach. Despite emerging technologies like anomaly detection, AI, predictive modelling, graph algorithms, and text mining, Sargsyan stressed that fighting fraud cannot be fully automated.

“Human expertise is essential for investigations, evidence collection, and final decision-making. To support these efforts, we must also provide investigators with modern tools for alert and case management, enabling them to access all necessary data quickly and efficiently and explore hidden links and correlations,” he said.

Further illustrating his point, he noted how SAS successfully implemented an anti-fraud project for a large motor insurer. They cleaned and consolidated the data, built machine learning models, detected anomalies, and designed fraud detection strategies, amongst others. However, once the solution was in production, it became apparent that employees were not using the system as intended. Internal enablement sessions were conducted, clear and efficient communication was ensured, precise performance metrics were defined, and organisational changes were made to address this, allowing the insurer to recoup their investment within two months of the system’s production.

Drawing from his experience in numerous digital transformation projects, Sargsyan identified key things to consider when enhancing anti-fraud strategies.

He highlighted the crucial role that data quality plays in this regard. “To leverage advanced analytics effectively, we must ensure that the data is of high quality, cleaned, and standardised,” he said. “High-quality data is essential not only for advanced analytical processes but also for alert and case management.”

Sargsyan stressed the importance of a comprehensive approach that involves the right methodologies, organisational adjustments, and effective communication. This way, an organisation can fully capitalise on the capabilities of both the teams and the technology.

Leveraging data-driven insights

In addition, Sargsyan emphasised the dual role of data-driven insights in combatting fraud and enhancing customer experiences. “By incorporating data-driven insights into these processes, insurers can optimise their operations, combat fraud effectively, and deliver exceptional customer experiences,” he said.

He noted that accurate and rapid fraud detection contributes to smoother processes for customers, so insurers constantly invest in modern technologies and AI solutions to decrease false positives, enhance the speed and efficiency of fraud detection, and ultimately streamline the claims settlement process, thereby improving customer experiences.

Evolving tactics of transnational organised crimes

Wu, with his expertise in financial crime investigation and advanced analytics, meanwhile highlighted the growing sophistication of transnational organised crimes and the rise of identity theft. "Criminals are now using digital platforms and encrypted communication to coordinate fraudulent activities across borders," Wu observed. This necessitates the use of advanced data analytics to detect and prevent fraud.

Outlining key strategies for successfully transitioning to proactive, data-driven fraud detection, Wu said that building a strong foundation of data analytics capabilities, prioritising cross-functional collaboration, and continuously evaluating and improving data-driven approaches are essential. By fostering a culture that values data-driven decision-making and breaking down silos between departments, insurers can develop comprehensive fraud detection strategies and enhance overall fraud management.

Proactive measures in the digital era

Wu advocated for proactive measures in fraud prevention, such as cross-referencing suspicious patterns with digital footprints and implementing automatic step-up authentication. “This not only ensures a seamless experience for legitimate customers but also makes it more challenging for fraudsters to bypass security measures,” he explained.

Generative AI technology is also set to enhance fraud prevention by identifying complex patterns and prioritising high-risk cases for fraud investigators.

As fraud tactics become increasingly sophisticated, the insurance industry must adopt advanced technologies and proactive strategies to combat fraud effectively. Insights from Sargsyan and Wu underscore the importance of leveraging high-quality data, fostering organisational synergy, and continuously evolving fraud management practices.

Both Sargsyan and Wu will be speaking in the upcoming “Strengthening Defences: Navigating Insurance Fraud Prevention with SAS” webinar by Insurance Asia and SAS on 20 June 2024.

Interested? Register here now to secure your spot at the event. For further information, please contact the Insurance Asia team at [email protected].