While there is no doubt that the insurance segment is witnessing an unprecedented annual growth, insurers continue to struggle with loss-leading portfolios and lower insurance penetration among consumers. Insurers are facing increasing pressure to strike the right balance, while ensuring adherence to underwriting and claims decisions in the face of regulatory pressures, growth of digital channels and increasing competition. Adding to this is the need to secure the good risks, while weeding out the bad risks.
Insurers are turning their attention towards big data and analytics solutions to help check fraud, recognize misrepresentation and prevent identity theft. With the government’s recent push to adopt digitization, the Aadhaar card plays a crucial role, linking income tax permanent account numbers (PANs), banks, credit bureaus, telecoms and utilities and providing a unified and centralized data registry that profiles an individual’s economic behaviour. The e-commerce boom provides additional data on financial behaviour.
Claims fraud is a threat to the viability of the health insurance business. Although health insurers regularly crack down on unscrupulous healthcare providers, fraudsters continually exploit any new loopholes with forged documents purporting to be from leading hospitals.
Medical ID theft is one of the most common techniques adopted by fraudsters. Due to this, claim funds are paid into their bank accounts, through identity theft. The insurer’s procedures allows for the policyholder to send a scanned image of his/her cheque, with the bank account details for ID purposes, which is then manipulated by the fraudsters.
Besides forged documents, other common sources of fraud come from healthcare providers themselves, with cases of ‘upgrading’ (billing for more expensive treatments than those provided), ‘phantom billing’ and ‘ganging’ (billing for services provided to family members or other individuals accompanying the patient, but not delivered).
Health insurers have to take action before an insurance claim is paid and to put an end to the ‘pay-and-chase’ approach. Using data to validate a pre-payment would be far more useful than having to ‘chase’ for a payment. This approach, however, rests on real-time access to information sources.
India’s life insurers suffer from low persistency rates that see more than one in three policies lapse by the end of the second year. This may be attributed to mis-selling, misrepresentation of material facts, premeditated fabrication and in other cases suppression of facts.
Life insurers have been facing fraud that is largely data driven and can be curbed with effective use of data analytics. While seeking customer information, insurers should perform checks against public record databases to ensure they have insights into the validity of personal information. This can be achieved through data mining and validation from various sources.
