Insurance Fraud Detection System

Insurance Fraud Detection System

Insurance Fraud Detection System Independent research estimates that significant amount of all insurance claims (approximately 15% and more) are fraudulent. The resulting costs, amounting to hundreds of billion dollars per annum, have a significant impact on insurance premiums and therefore competitive market dynamics. Across the industry s value chain, insurance agencies, brokers and insurers share the responsibility to minimise fraudulent claims to customers and regulators. Traditionally, insurance companies had to invest in highly skilled human resources and manual investigation processes to fight fraud. Leading organisations in the insurance industry are now taking advantage of pro-active, automated fraud detection. Based on behavioural science and information technology, these solutions deliver measurably higher returns on investment in fraud investigation. Rather than being limited to detecting and analysing fraud after the fact, innovative companies now apply technology for predictive analysis of fraudulent behaviour. Data mining techniques allow the development of intelligent scorecards providing the information needed to develop powerful business rules, which in turn enable early detection and prevention of fraud. Embedding these techniques in operational risk management workflow processes assists skilled investigators to dramatically reduce fraudulent claims and the impact they have on customers. It is also effectively used to identify and pursue organised fraudsters. With Gratex s Insurance Fraud Detection System DeNovius(tec) insurance organisations across Europe and Asia can now reduce the business impact of fraudulent claims resulting in improved competitiveness of their premium structures, higher customer satisfaction and significant reduction of fraud related cost. 01. Business Goals DeNovius(tec) is a comprehensive fraud detection system for insurance business which provides: Effective identification and investigation of any fraudulent behaviour of clients as well as employees on the basis of the latest knowledge and technology, Full integration of predictive fraud detection engine into the whole cycle of claim processing, Track record of all identified fraudulent claims and permanent automatic improvement of the predictive models and investigation procedures system based on it, Flexible adjustment of the fraud detection rules according the needs of the insurance company. 1

02. Key business challenges WORK FORCE LIMITATIONS SILO EFFECT INSURANCE COMPANIES CANNOT AFFORD TO EMPLOY LARGE NUMBER OF INVESTIGATORS TO DETECT FRAUDULENT ACTIVITIES DIFFERENT LINES OF BUSINESS FACE DIFFERENT PROBLEMS, LACK OF INFORMATION TRANSFER DISABLES TO SHARE INFORMATION TO DETECT FRAUDULENT BEHAVIOUR POOR DATA QUALITY COMPETITION THE DATA IS OFTEN ALLOCATED INTO VARIOUS SYSTEMS, DATABASES AND VENDORS WITHOUT ANY CONSISTENCY AND INTERCONNECTIVITY. HENCE TO FIND INFORMATION OF FRAUDULENT BEHAVIOUR IS ALMOST IMPOSSIBLE FIERCE COMPPETITION CREATES PRESSURE ON PRODUCT MARGINS AND OVERALL COSTS, HENCE ANY NEW INVESTMENT IN MODERN TECHNOLOGIES IS OFTEN POSTPONED FRAUDSTER S BEHAVIOUR RISING NUMBER OF FRAUDS FRAUDSTERS ARE ABLE TO FIND SOPHISTICATED METHODS OF FRAUD, FORCING INSURANCE COMPANIES ONLY TO,,CATCH-UP STRATEGY INSTEAD OF,, PREVENT/PREDICT STRATEGY MIL USD YEARLY OF ADDITIONAL COSTS TO INSURANCE SECTOR 03. System Description DeNovius(tec) applies implicit fraud management knowledge to operational workflows. It integrates several levels of data analysis, including data mining and predictive modelling. The system automates investigative processes, significantly shortens claims and commission turnaround time and addresses the growing problem of fraudulent behaviour while allowing for specific end user requirements and different local needs. As the system identifies and manages fraudulent claims for further investigation across business lines and enterprise processes, it continuously builds an internal knowledge base. The on-going tuning of fraud detection rules and predictive models increases the success rate of fraudulent behaviour detection over time. The system combines internal fraud management experience with multiple industry detec- tion techniques to increase the probability of fraud identification. Alerts generated by predictive models are assessed using multi criteria scoring methodologies. The scorecards are routed to the appropriate investigation units for more in-depth analyses, such as a connection to previous cases or specific social-network behaviour. For on-going process improvement, results of fraud investigations are used to back test predictive models. Opportunity FRAUD Pressure Rationalization 2

04. System Features The need for detection, analysis and control of fraudulent behaviour demands a sophisticated yet user friendly solution, which can also manage large volumes of data. DeNovius(tec) provides modern detection features embedded directly into the operational workflow. Contract Definition Internal and external data sources are consolidated. Data warehouses and data marts are optimised for fraud detection processes. Internal or third party applications are fully integrated within the workflow. Solvency II ready structure meets regulatory requirements. Aligned Predictive Models and Business Rules Rules and predictive models are created and managed in line with defined internal risk management and operational processes. Predictive models are regularly verified against statistical significance based on real data. Parameters of scoring criteria are managed based on actual results; continually improving the results for precise investigation. Fraud Identification Fraud alerts are generated in real time, using optimised scoring algorithms that utilise the power of both, business rules and predictive modelling. Additional information like expected claim value, total score of the fraud, and connection to previous fraudulent cases is generated to support the investigation process. Information is effectively shared within teams and processes. Fraud Processing Based on business rules, fraud cases are automatically assigned to the appropriate team or member and in line with defined internal operations processes. Real-time scores are calculated for each alert. Alerts are reported in real time for better decision-making. To minimise investigative overhead, only incidences with statistical significance are reported. Reported claims are tracked across products or lines of business providing a consolidated view. Historical behaviour of fraudulent claims is tracked; the results are used as additional information for predictive models and investigation teams. For improved productivity, investigation results can be integrated with document management systems and sales force activity management systems. 3

05. System Architecture External Sources Fraud Detection System End Users Data Integration(DWH) PUBLIC REGISTRY 1 PUBLIC REGISTRY N PRODUCTION SYSTEM CRM ERP Data Mart Realtime Reporting Data Mart AdHoc Reporting Data Mart OLAP Analysts Rules Management Predictive Models Management FRAUD ALERTS Insurance Fraud Investigator / Analyst Insurance Claim Adjuster Underwriter 4

06. Benefits Create more value for your customers and partners Efficient detection, prevention and management of fraud is rewarded by increased customer satisfaction, while the sharing of critical information with other industry participants improves the overall resilience of the insurance market against fraud. Regulatory and shareholder requirements are met more consistently and at lower cost through the automation of sophisticated fraud management and data handling. In addition, clawbacks can be reduced through automated monitoring of behavioural patterns across sales networks. Detect More Fraudulent Activity DeNovius(tec) is optimised for detection of fraudulent activities in the claims handling processes and allows to: Embed check rules into the workflow, and identify suspicious claims at the very beginning of the claims process to prevent fraud, Use advanced modelling methods to identify exceptions and anomalies to increase the likelihood of fraudulent behaviour detection, Regular fine-tuning of predictive models based on real data increases the ability of the system to detect previously unknown behavioural patterns, Work with consistent data based on industry standards and in compliance with Solvency II requirements. Optimise the process of claim settlement As fraud detection is a vital part of the insurance business, the appropriate handling of claims needs to be integrated with effective risk management policies. As a result customer satisfaction will increase and loss-adjustment expenses will be reduced. DeNovius(tec) provides industry leading techniques to avoid fraudulent losses: Stops claims or commission payments when fraudulent behaviour is detected through advanced online or batch scoring methods. Identifies repeat offenders and their potential connections through effective search across multiple systems and databases. Provides evidence of fraudulent behaviour for legal investigation; scoring models can be applied to present these results. Connects the investigation data to CRM systems as well as sales force activity management systems to increase prevention. Inserts active scoring outputs and analytical models into process workflow, enabling real-time access to information. Tracks records of claims handling, connecting the information to your analytical models, detecting insider actions. 5

07. References Allianz Slovenská poisťovňa Gratex International implemented the Fraud Detection System in Allianz Slovenská poisťovňa, the leader of the Slovak insurance market, in 2008. The basic aim of the insurance company was to improve the insurance fraud management, to detect and prevent fraudulent behaviour of the clients, as well as employees. The implementation of the Fraud Detection System automated investigative work, shortened the inspection time for processing claims from weeks to hours and addressed the growing problem of fraudulent behaviour. This system was developed with respect to end user requirements, local distinctions and knowledge. 6

08. About Gratex International Gratex International is one of the leaders in developing enterprise software solutions based on high-tech technologies. Our dedicated and highly skilled teams build sophisticated custom solutions that add value, streamline business operations, and increase bottom-line profitability, for our customers and their organisations. Our solutions are tailored to the needs and requirements of particular market sectors and are highly customisable to meet the needs of individual clients. This enables our customers to get the most out of their investment with Gratex. Primarily focused on the insurance industry, we also provide solutions for the financial, banking and telecommunication industries. The quality of our solutions stems not only from our methodologies and technical expertise, but also from our analytical knowledge and extensive research into our clients industries and marketplaces. In addition to our sophisticated portfolio of software solutions, we offer a range of professional and consulting services to ensure the successful implementation, deployment, operation and administration of our technology within our client s business environment. Gratex s team is comprised of almost 400 highly qualified staff, two thirds of whom participate directly in research and development. That represents a significant investment in the future roadmap of our solutions and the business value they give to our customers. To support the work of our development efforts, we employ a range of certified specialists in the areas of development, project management, business process management and security. Gratex International is based in Central Europe (Bratislava, Slovakia), with local offices in Sydney, Australia and a registered branch office in Seoul, South Korea. Gratex International s total revenue for the year 2011 is 35 million EUR. Gratex International is certified for ISO 9001:2008, ISO 27001:2005, ISO 14001:2004 and OHSAS 18001:2007, all implemented into an Integrated Management System. 7

NEXT STAND-ALONE MODULES OF THE DENOVIUS INSURANCE INDUSTRY SOLUTION ARE ALSO AVAILABLE: (re) AUTOMATED AND OPTIMISED REINSURANCE PROCESSES IN ONE PLATFORM (cdm) AUTOMATED TRANSACTIONS OF COMPLEX COLLECTIONS AND DISBURSEMENTS (doc) DIGITAL DOCUMENT PROCESSING SEAMLESS INTEGRATION OF ALL DOCUMENTS AND PROCESSES (co) PRECISE, STREAMLINED COMMISSIONS AND SALES MANAGEMENT 8

Gratex International, a. s. (Headquarters) GBC IV Galvaniho 17/C 821 04 Bratislava Slovak Republic Phone: +421 2 5341 1441 Email: sales@gratex.com Email: marketing@gratex.com Company websites: www.gratex.com www.gratex.com.au www.gtiinsurancesolutions.com Gratex International Pty Ltd G1, 2B Lord Street Botany, NSW 2019 Australia Phone: +61 2 8335 1100 Fax: +61 2 8335 1190 Email: info@gratex.com.au Sales: sales@gratex.com.au Gratex International Allianz Tower 45-21 Yoido-Dong Youngdeung po-gu Seoul, Korea Phone: +82 10 4066 0724