Insurance is the transference of risk to a third party. The monetary value of the risk is then born by the insurance company, which covers that value within the insurance premiums it charges to its customers. The more the insurance company pays out to individual customers, the higher the premiums it has to charge all customers.
This has two effects. Firstly, the insurance company gets fewer customers, and secondly the majority of customers who don’t receive payouts have to pay more for those customers that do. Premiums rise and insurance company profits decrease. The whole pernicious cycle is aggravated by false, fraudulent claims against the insurance company. Since insurance companies cannot pay less than they are contractually obligated to pay genuine claimants, the only solution is to pay more attention to locating and eliminating the fraudulent claims – but fraud is difficult to detect.
Global French insurance group AXA’s own research shows fraud theft rising 12% from 2009 to 2010, while according to the Association of Certified Fraud Examiners (ACFE), 2009 had a potential total fraud loss of more than $2.9 trillion.
To help solve this pernicious cycle AXA has adopted BAE Systems Detica’s NetReveal anti-fraud product. NetReveal is an analytics system that detects hidden relationships that would otherwise be easily missed in large amounts of data.
“All insurers need to focus on claims fraud, and Detica NetReveal will provide us with effective means of reducing risk”, comments Pierre Brigadeau, Group Chief Claims Officer, AXA Global P&C. He expects NetReveal to allow the company to spend less time on investigating potential fraud while having greater success in finding and eliminating it.
The advantage in using an analytics-based rather than a more traditional rules-based investigation is that the insurance company can now monitor all activity rather than just look for examples of known fraud patterns. New examples of suspicious behavior are easily uncovered.
AXA has adopted NetReveal to provide a uniform approach to fraud discovery across its whole global operation.