Of Special Interest


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2nd October 2013

SAS-a hybrid analytics approach to fighting insurance fraud

Insurance fraud has long been a major issue and continues to grow, particularly with the continued rise of direct business and comparison sites in the UK. Although the Association of British Insurers(ABI) reports that the value of detected fraud grew 21% pa between 2004 and 2011 to an estimated £1.1bn, the ABI and the National Fraud Authority also say that unknown fraud in the UK insurance market could be as much as £1.7bn pa. There is an estimated 10% of policies which could be fraudulent(echoed by research in the US and across Continental European markets), and premium losses from those are not included in the figures above. In fact, SAS estimates combined fraud exposure for the UK motor insurance sector alone is at least £1.9bn pa-bigger that the fraud estimate in UK retail banking.
Insurance Newslink met with Martyn Kyle, head of Insurance UK & Ireland at SAS, and Michael Rhodes, senior Fraud Consultant, who has written a white paper headed "Fraud Governance in the Insurance Market" to review their positioning and product, SAS Fraud Framework for Insurance.
Published surveys over the last year have placed fraud detection as a high priority for insurers, but also indicate that many have been taking a piecemeal approach. Criticism has been made that fraud detection has been too concentrated purely on the claims process.
The sophisticated solution from SAS is to apply a hybrid analytics approach to fight fraud, particularly including the quotation and proposal stages with the aim of prevention rather than just detection. Advances in analytics means that in addition to third party reference data, business rules, predictive models, anomoly detection models, and social network analysis can be reviewed across enterprise data, and beyond, incorporating text analysis such as grammar and semantics.
The bottom line for insurers, says Rhodes, is to improve the combined ratio, and reduce premiums where appropriate- particularly in the unprofitable and under-pressure UK motor insurance sector, with both the honest policyholder and the smarter insurer benefiting-going beyond fraud detection to incorporate prevention.
SAS demonstrated Visual Analytics which enables senior managers, underwriters, and claims experts to identify trends and quickly initiate reports from anywhere, 24X7, without recourse to analysts.
The positioning, demonstration, and white paper indicated SAS's detailed understanding of the issues, challenges, and differentiation opportunities for insurers in fighting fraud.
SAS recently opened a Fraud Centre of Excellence in Scotland, indicating their commitment.
Download the white paper at: