( ClaIms )
Managing Fraud from
Quote to Claims
By MIChAEl GAuGhAN, VICE prESIdENt, trANSuNION INSurANCE
“Why are my premiums so high?” If you are in the personal passenger auto
insurance industry, this is a familiar question. This complaint is commonly heard
by agents and call center representatives. Unfortunately, the answer is that a
significant portion of that premium is paid out in fraudulent claims or lost to rate
evasion. The Insurance Information Institute estimates that fraud accounts for
10 percent of the property/casualty insurance industry’s incurred losses and loss
adjustment expenses, or about $30 billion per year. If carriers can find effective
tools to reduce fraud, rates will go down.
Fraud can take on many forms. There is a small group of individuals who think
being “creative” on their auto application to get a lower rate is acceptable. Many
of them believe that everyone does this, but the truth is most people are honest
and forthcoming on their applications. Unfortunately, the honest clients pay higher
than necessary premiums, because they are subsidizing the small percentage who
misrepresent their application information. Professional fraudsters develop complex
plans to steal from insurance companies. The one constant is that this fraud increases
the cost of insurance, and the cost is ultimately borne by the policyholders.
Carriers are constantly seeking new tools to fight fraud and solutions to deploy at
the point of the quote. It is much more effective to validate questionable application
data—and possibly not issue a policy—than try to avoid paying a claim that has a
high likelihood of being fraudulent. Carriers are also searching for products that can
scan application data in real-time, compare that information to multiple validation
databases and employ sophisticated analytics to determine the applications that
warrant further validation. TransUnion Risk Verification Platform is able to deliver
smart, actionable results in real-time at the point of quote.
Risk Verification Platform accesses identity information by interrogating
the most complete set of comprehensive, current data sourced from multiple
independent databases. Using advanced match logic, Risk Verification Platform
can determine the identifying data with the highest probability of accuracy. In
applications with multiple carriers, Risk Verification Platform found 5.8 percent
of the applicants had a high likelihood of living in a higher-rated territory.
Risk Verification Platform contains some of the most complete and up-to-date
information available for vehicles. In real-time, Risk Verification Platform can
deliver brand histories. Junk, salvage, flood, fire and rebuilt titles can be identified
instantly. Risk Verification Platform identified almost two percent of applications
made to a group of preferred carriers; nearly one in every fifty included vehicles
that had been rebuilt.
Recent accident information is also available, including collision damage
estimates and estimates that resulted in vehicles being declared a total loss.
The same group of preferred carriers found that 4 percent of the applications
included automobiles that had a repair estimate for collision damage in the
previous ninety days. In addition, 2.4 percent of the applications contained a
vehicle with a commercial registration.
The following are examples from recent Risk Verification Platform activity.
In these cases, carriers provided data from policies they issued and TransUnion
processed that data through Risk Verification Platform. Industry experts in claims
fraud reviewed the applications and provided their opinions.
Example 1: texas Policy
In this example of a Texas policy application, Risk Verification Platform
identified the individual as having a high likelihood of providing a false identity. In
addition, Risk Verification Platform found the actual address of the applicant was
in a higher rated territory than the address provided with the application. Finally,
Risk Verification Platform found several problems with the vehicle. It had been
involved in a collision repair estimate in the previous 90 days, and the vehicle’s
title had been branded as a total loss and later rebranded as a rebuilt vehicle. The
experts concluded that this policy showed the signs of a rate evader with previous
vehicle damage and a risk of producing a fraudulent vehicle-damage claim.
Example 2: florida Policy
In this policy application example from Florida, Risk Verification Platform
recognized that the input address was a mail drop—the actual address was in a
higher rated territory. In addition, the vehicle title was branded as having been a
dismantled vehicle. The combination of a mail drop and dismantled vehicle is the
classic combination of staged PIP fraud. The experts concluded that the policy
was at risk of suffering both a fraudulent PIP loss and rate evasion.
Example 3: multiple Policies
In this case, several Florida policies were found with the same characteristics.
Risk Verification Platform identified each of the application addresses as a mail
drop. In addition, Risk Verification Platform was unable to locate valid addresses
for the applicants, and each of the vehicles had commercial registrations. The
experts concluded the policies had high likelihoods of containing vehicles used in
commercial businesses for which the applicants were attempting to gain personal
Risk Verification Platform can help carriers improve pricing accuracy and
address fraud. The solution decreases losses by verifying critical data early in
the claims process. It allows carriers to identify applications that require more
attention and delivers actionable instructions to lead carriers in the next critical
steps of the process. Risk Verification Platform allows carriers to accurately and
fairly price policies and establish fairness for their honest policyholders. n