Insurance companies lose billions to fraud every year. Most insurers have anti-fraud programs in place, but losses continue to rise. Predictive models use old data and trends to predict what is coming and make estimates. However, when the data isn’t consistent this model can be counterproductive. Due to the surge of Covid-19 cases and an uptick in severe weather events old models are insufficient. This can make it harder to detect fraud.
Insurance companies that still use predictive models constantly need to monitor model performance and incorporate new data. Then they must look for new trends. This is time-consuming and more errors occur. Many companies are turning to AI to cut losses.
What is AI?
AI is the simulation of human intelligence by computer systems. Basically, it’s a computer’s ability to think, learn, and behave like a human. However, unlike humans, AI can process and interpret huge amounts of data with high accuracy.
What is Insurance Fraud?
Insurance fraud is any act to defraud the insurance process for financial gain. Insurance fraud costs over $40 billion each year. This leads to an increase in premiums for all policyholders. Some actions you may not even know are considered fraud. Typical scams include:
- Falsifying information to get lower premiums.
- Selling insurance without a license.
- False or exaggerated claims by policyholders.
- Misclassification of the cause of damage.
AI Can Detect Fraudulent Claims
AI algorithms analyze the data on insurance policies and claims. Computers can cross-reference data to detect abnormal similarities. This allows it to scope out false or exaggerated claims. These claims are often used by clients to get a low premium and a high payout. The computer flags abnormalities for human investigation.
Health Insurance Fraud
Health insurance fraud is typically committed by organized groups. There are many scams in the health insurance landscape. Some common ones are adding procedures that never occurred to legitimate claims or using stolen patient data.
AI Predictive modeling helps prevent this by looking for patterns in the data. Meanwhile, insurers are must analyze case-by-case. This means it’s more likely for a human to miss someone exploiting the system.
Auto Fraud
Insurers can monitor drivers using AI. A common form of fraud is misreporting the cause of an accident. Drivers who were at fault may blame other factors. AI can determine if you were paying attention or if you were practicing safe driving.
Catastrophe Fraud
During disasters, some people inflate or fabricate damages to receive a higher payout. Some will even destroy their own property to get extra money. AI can be used to analyze all of the claims in the area and determine if any claims appear to be exaggerated.
Concerns about AI
Many people fear that ultra-efficient computers will take jobs from humans. However, AI technology actually helps the actuary do their job. The machine spends its time processing data and learning so it can offer accurate data. Then, actuaries can review the data and make the best decision for the company. They also have more time to spend on more complicated tasks.
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