We put the "AI" in claims!

Included in this edition:

• Network Fraud and Its Impact on Claims Management
• CFO Eugene Wong joins?CFO Thought Leader podcast
• What can P&C carriers expect to see in 2025?
• Top 10 Claims Inefficiencies and How to Solve Them

Network Fraud and its Impact on Claims Management

Fraud, particularly in the context of property-casualty (P&C) insurance, remains a substantial and evolving challenge, exacerbated by the increasing interconnectedness of insurers, third-party vendors, and digital platforms.

The phenomenon of network fraud, which exploits this interconnectedness, has profound consequences for insurers, policyholders, and the integrity of the claims process itself. The insidious nature of such fraud undermines the operational efficacy of the claims system, compromises data integrity, and threatens the overall stability of the insurance market.

Property-casualty network fraud refers to fraudulent activities that exploit the interconnectedness of insurers, third-party vendors, and digital systems. These schemes typically involve collaboration among multiple parties, including policyholders, repair vendors, medical professionals, and adjusters, who manipulate the claims process for financial gain. Fraudsters may exploit weaknesses in claims handling or partner with others in the supply chain to create or inflate claims.

Common Types of Network Fraud

Common types of network fraud include staged accidents, where fraudsters orchestrate incidents like vehicle collisions or property damage and collaborate with medical providers and repair shops to exaggerate the severity of injuries or damage. Inflated or fake repair bills are another common scheme, where dishonest vendors submit inflated invoices for non-existent or unnecessary repairs.

In personal injury cases, medical providers may submit exaggerated or fabricated treatment claims in collaboration with legal experts. Duplicate claims involve re-submitting altered details of denied or settled claims across multiple insurers for additional compensation.

Impact of Network Fraud on Claims Management

Network fraud has far-reaching consequences. First, it leads to increased operational costs as insurers must invest in fraud detection, investigation, and prevention. Fraudulent claims also cause delays in claims resolution, leading insurers to implement more stringent scrutiny measures that result in longer wait times for legitimate claimants.

Moreover, insurers who fail to detect and prevent fraud risk significant reputational damage; customers expect a fair, efficient claims process, and a perceived ineffectiveness in addressing fraud can erode trust, resulting in customer dissatisfaction and potential loss of business. Additionally, fraudulent claims distort the accuracy of insurers’ claims data, which is crucial for assessing risk and setting appropriate premiums. Inaccurate data can lead to flawed underwriting decisions and improper pricing models.

Finally, insurers that do not take adequate steps to combat fraud may face increasing regulatory scrutiny, with governments and regulatory bodies pushing insurers to adopt more robust anti-fraud measures to avoid penalties or investigations.

How to Combat Network Fraud

1. Data Analytics and Artificial Intelligence: Insurers are leveraging advanced data analytics and AI to detect patterns indicative of fraud. Machine learning algorithms can analyze large volumes of claims data to flag anomalies and identify suspicious claims before payouts are made.
2. Collaboration and Information Sharing: Collaboration among insurers, industry groups, and regulatory bodies is critical for combatting network fraud. Shared databases allow insurers to exchange information on known fraudsters, enhancing their ability to identify fraudulent activity across multiple platforms.
3. Vendor Due Diligence: Insurers can minimize the risk of fraud by conducting rigorous background checks and monitoring the performance of third-party vendors, such as repair shops and medical providers, to ensure they adhere to ethical standards.
4. Employee Training and Awareness: Educating claims adjusters and other staff members on fraud detection techniques is essential. By training employees to recognize common fraud schemes and red flags, insurers can prevent fraudulent claims from being processed.

A Smarter Approach to Insurance Fraud

Network fraud presents a significant challenge to the insurance industry, driving up costs, causing delays in claims processing, and undermining consumer trust. By adopting advanced technologies, strengthening collaboration, and implementing robust fraud detection protocols, insurers can mitigate the impact of fraud on the claims process. A proactive, multi-layered approach to fraud prevention is essential for maintaining the integrity of the P&C insurance industry and ensuring fair treatment for all policyholders.

Ready to outsmart network fraud? See how CLARA Fraud leverages cutting-edge AI to keep your claims process secure and efficient. Learn more here.

CLARA's CFO, Eugene Wong, Featured on CFO Thought Leader Podcast

Eugene Wong joined CLARA in 2024 and has been an agent of change and growth with his strategic CFO playbook:

??? Maintain a holistic view

?? Balance resource allocation across growth, profitability & innovation

?? Embrace iterative decision making and operational agility

??♀? Champion a people-centric approach

Listen to the episode here.

Property and Casualty Insurance Trends for 2025

The year 2024 has been a volatile one for P/C carriers, prompting many insurance professionals to speculate about what 2025 has in store. On a positive note,?U.S. carriers posted a $4.1 billion net underwriting gain on P/C for the first nine months of 2024. That’s outstanding news, especially when we look back at the $32.1 billion loss from the same period in 2023. These positive results were influenced by $8.5 billion of favorable reserve development and an uptick in the industry’s combined ratio to 97.9.

P/C claims organizations also faced continuing pressures, though.?Litigation rates went up, and we saw yet another increase in the total number of nuclear verdicts. Claims and loss development continue to be volatile, with so-called “sleeper” claims on the rise. Core inflation is having an impact as well, driving up the cost of medical care for claims involving a bodily injury.

To add further to the pressure, demographic changes are making it increasingly difficult to attract and retain experienced claims adjusters. That’s driving many insurers to turn their attention to operational efficiencies. Reliance on manual processes leads to overburdened claims management teams, which adversely affects both outcomes and customer satisfaction. Claims leakage is a persistent issue, yet the problem only stands to get worse as the war for talented personnel intensifies.

Unfortunately, most carriers lack the data-driven insights necessary to effect meaningful change. Reliance on legacy systems is a significant barrier, yet?74 percent of insurance companies still perform their core claims management functions using outdated technology?and poorly integrated point solutions.

What Can Insurers Expect in 2025?

Where does that leave us with respect to trends for claim operations in 2025? Insurance analysts and industry?insiders predict a transformative year ahead, as top executives increase their focus on efficiency and growth. Carriers will apply lessons learned over the past few years to hone their technology strategy and fine-tune their approach to partnerships. Here are some key trends to watch for in 2025:

1. AI will power data-driven insights to a new level. Insurance industry pioneers in AI and machine learning have discovered what works, what doesn’t, and which approaches are adding the most value. With a proven road map in hand, AI adoption will shift into high gear.
2. Technology modernization will accelerate, as P/C carriers increase investments in new technology to support stronger integration, operational efficiency, digital distribution and greater flexibility in their interactions with distribution channels.
3. Digital experiences for customers and agents will gain momentum. Omnichannel digital interactions are the new norm, as customers have come to expect anytime/anywhere access via their preferred channels of communication. Agents and partners, likewise, will benefit from improved digital experiences.
4. Insurers are already preparing for the next wave of innovation, as top leaders recognize the transformative impact of technology leadership. This increased focus on innovation will gain momentum in 2025.
5. Tighter collaboration between claims management and underwriting?will take on greater importance, as insurers refine their approaches to risk assessment, policy formulation and improved claims outcomes.

Planning for a Transformative 2025

Technology holds the key to making 2025 a transformative year for P/C. AI and machine learning are delivering eye-popping ROI, and core system modernization is removing long-standing barriers to innovation and efficiency. Digitization is improving brand loyalty and satisfaction, and it’s dramatically increasing the productivity of customer-facing teams.

With any emerging technology, early adopters blaze the trail by matching capabilities with use cases, then piece together various components to deliver a complete solution for their business requirements. In other words, the “build versus buy” debate leans heavily toward a DIY approach for new technologies. That can be expensive, and it invariably takes longer than expected.

Fortunately, we have passed that early-adopter stage with AI and machine learning. Transformative products can give you a complete and up-to-the-minute picture of your entire claims portfolio, with detailed insights into litigation risk, medical outcomes, potential fraud and overall risk.

The bottom line: Today’s insurers have access to purpose-built technologies that have consistently delivered outstanding results for insurance carriers around the globe. By adopting proven out-of-the-box technologies, P/C insurers can confidently achieve real-world ROI in the triple digits, enhancing both the art (decision-making) and science (data) of what they do.

As first seen in Carrier Management.

Top 10 Claims Inefficiencies—and How to Solve Them

From claims leakage and fraud to missed subrogation opportunities, inefficiencies add up fast—costing insurers billions every year.

Our latest white paper breaks down the top 10 claims inefficiencies and how leading insurers are solving them to reduce cycle times, cut costs, and improve accuracy.

Download the white paper to learn how to solve these 10 claims inefficiencies.