SUMMARY: In the realm of life insurance claims, a multitude of scams, ranging from false identities to unauthorized beneficiary changes, present ongoing challenges. This pervasive issue of insurance fraud is not a novel one but is evidently escalating globally. Various statistics highlight the concerning surge in fraudulent activities:
- Aviva’s 2021 report on insurance fraud in the U.K. revealed a 13% increase in fraudulent claims, with more than 11,000 instances totaling over £122 million.
- Singapore reported over three times the number of fraudulent claims in 2020 compared to 2018.
- A survey by the Insurance Institute of India indicated a 27% increase in insurance fraud during the COVID-19 pandemic, with nearly 70% attributed to false documentation.
- South Korea witnessed a 5% rise in the total amount of money involved in insurance fraud cases in 2021, reaching approximately $750 million.
- In the U.S., the Coalition Against Insurance Fraud estimates an annual loss of at least $80 billion due to fraud, including a recent case involving a $26 million life insurance scam spanning from 2013.
The COVID-19 pandemic has further exacerbated fraudulent activities, with opportunistic fraudsters taking advantage of disruptions and uncertainties. Modified underwriting and claims practices, designed to assist policyholders during the pandemic, inadvertently created new avenues for exploitation. The widespread nature of the problem led the U.S. Department of Justice to establish a dedicated hotline for reporting COVID-19-related insurance fraud.
In the face of these challenges, life insurance claims departments must prioritize fraud prevention as an integral part of their operations. It’s crucial to strike a balance between reducing fraud and enhancing the customer experience. The following best practices can aid insurers in achieving this balance while streamlining claims processing:
- Implement Robust Claim Controls and Processes: Basic safeguards, such as random post-claim audits, remain essential. Utilizing industry resources, such as fraud alerts from the International Claim Association (ICA), provides additional support.
- Consistently Train and Educate Claims Teams: Given fraudsters’ constant adaptation, ongoing training is vital for claims examiners to stay abreast of the latest schemes and emerging red flags.
- Promote Awareness Across the Organization: Fraud identification is not exclusive to claims and underwriting teams. Staff across departments should be educated on fraud schemes and empowered to identify potential red flags.
- Participate in Industry Conferences: Collaborative efforts within the industry, facilitated by conferences like the RGA Fraud Conference, allow for the sharing of knowledge, best practices, and insights into emerging fraud trends.
- Foster Collaboration Among Business Units: Breaking down silos and fostering communication between underwriting and claims teams helps identify and address potential fraud red flags throughout the customer journey.
- Leverage Data and Predictive Analytics: While more common in disability claims, data analytics are increasingly being explored in life insurance to detect potential fraud by connecting data points and identifying suspicious combinations.
Ultimately, the goal is not only to detect and prevent fraud but to ensure that legitimate claims are promptly honored. By having effective fraud prevention systems in place, insurers can fulfill their promise of providing financial protection to policyholders and take pride in delivering on that commitment to the policyholder’s family.