As part of our ongoing commitment to move the industry forward against fraud, RGA is a proud member of the Coalition Against Insurance Fraud, America’s only anti-fraud alliance speaking for consumers, insurance companies, government agencies, and others. We invited Matthew Smith, Executive Director of the Coalition to present at our 2021 RGA Fraud Conference, the premier cross-discipline fraud event for the insurance industry. Below is a brief interview with Matthew regarding his presentation, “Charting a Clear Vision for Fighting Insurance Fraud – Issues and Challenges in the Decade of the 2020s,” and related topics.
How has COVID-19 impacted the fraud landscape?
When the pandemic hit in March 2020, everybody was in panic mode, expecting an explosion of COVID-19-related fraud. The ingredients were all there: an unfamiliar disease, economic turmoil, social and business disruption, and general anxiety about so many unknowns. In the first weeks and months, reports from Interpol and others mainly told of fraudsters getting older people on the phone and convincing them to buy bogus supplemental coverage. In the U.S., changing beneficiaries on life policies were the predominant scheme. Yet overall, as months wore on, the large spike we feared didn’t materialize.
Having said that, it will take some time – perhaps up to three years or so – to really know the impact of COVID-19 on fraud in the life and disability space. What we thought was going to be an immediate peak in fraudulent activity wasn’t there, but it remains unclear where we go from here. Financial need is a primary driver of insurance fraud, so if the economy goes off the rails or we hit persistently high levels of inflation, we may yet see that spike. That’s why it is so important for insurers to take action now to protect themselves.
What are the most common schemes or types of fraud you are seeing?
We’ve seen an increase in identity theft, which has become the most prevalent form of fraud during the pandemic. Scammers are pretending to be other people or even creating synthetic personas to secure benefits. They gain access to policies, file claims, collect the money, and disappear. With so much personal information floating around online and people so willing to share details about their lives on social media, clever fraudsters are piecing together enough information to get past basic digital verification.
Telehealth is another area where we are seeing an uptick in fraud – and not all of it is intentional. Advances in and widespread adoption of telehealth that most believed would have taken years occurred in just months. As a result, many providers are unsure of processes to follow, such as which CPT codes to use in which situations. Uncertainty breeds opportunity for fraud, and some telehealth “mistakes” could be the work of fraudsters looking to take advantage of the situation while they can.
How do advances in technology and data analytics figure into fraud prevention?
Like virtually every aspect of modern business, effective fraud prevention moving forward will require embracing technology. A statement I’ve heard that I agree with is: Artificial intelligence (AI) will not replace humans, but humans who fail to use AI will be replaced. Technology is just a tool, but it is a powerful one. The rise of AI, machine learning, and data analytics will empower insurers to identify fraud earlier in the insurance process – ideally at the application stage – instead of waiting until a fraudulent claim is made when it is often too late. Just think of the potential of using technology like facial recognition and retina scans to cross-check against other data and policies.
Of course, future regulations and legislation will determine how insurers will be able to employ technology, and we can expect a flood of data privacy bills in the coming years. A bill pending right now in Colorado that may well become law this year stipulates that If any insurer is using data analytics, AI, or related technology to assess a policy application or claim, that insurer must certify that the software program is free of any bias or systemic prejudice. The burden to prove that falls solely on the insurance company. While the intent of the bill is to protect consumers, it also has clear implications for insurers’ ability to effectively serve consumers. At the Coalition we are working to help regulators understand the importance of these technologies as fraud-fighting tools. We want to establish appropriate guardrails that both protect consumer privacy and allow insurance companies to protect themselves.
What is one thing insurers can do right now to fight fraud?
If I go to your company’s website and type in “fraud,” what will I see? If you want to get serious about fraud, make your commitment to fighting it prominent and visible. Develop clear messaging and a public statement featured prominently on your website about not tolerating fraud in any form. Along with that statement, provide instructions on how to report suspected fraud. Fraudsters will think twice about attacking a company that has made combatting fraud a clear priority, whereas a company without such a commitment becomes a prime target.
What will be the focus of your presentation at the RGA Fraud Conference in August 2021?
I will explore what the insurance fraud fight is going to look like in the decade of the 2020s. Different factors are converging to make the future uncertain, so it is imperative for the industry to lay out a clear vision. Examples of topics include:
- The rise of technology is creating a whole new industry: peer-to-peer insurance, on-demand insurance, and entire transactions taking place on smart devices – no paper, no agent. This evolution will create new portals for committing insurance fraud.
- Millennials are now the dominant generation in our population and workforce. They grew up in a digital world in which the lines are blurred as to what constitutes fraud or theft – think about digital music downloads, for example. So what impact will their worldview have on things like disclosures and claims?
- Insurance fraud is now globalized – anyone can commit fraud anywhere in the world. That’s why we’re pulling together global fraud fighters and conducting a globalization study of 40 nations, to be released in November.
- The insurance fraud community is facing a flood of retirements, and we need a new generation of fraud fighters to step up. This next generation must be highly skilled and highly diverse – more representative of both the consumers we serve and the fraudsters we battle.
Continued coordination throughout the insurance industry will remain the most important factor in fraud prevention in the next decade. Fraud affects every business line and every step in the insurance process. Only by working together can we hope to keep up with those working against us.