Fraud costs ICBC millions of dollars each year, but investigators now have a new tool to help them combat insurance fraud: analytics technology that uses data, algorithms, and statistical methods to identify cases where the facts don’t seem to add up to an honest claim.
“There are so many data fields in a claim,” says ICBC spokesperson Sam Corea. “Sometimes you have to rely on an adjuster remembering a similar name from previous experience. While we will continue to rely on good old-fashioned methods, this will assist investigators. It’s in addition to everything else we do with fraud claims.”
ICBC performs 5,000 claims investigations a year. Insurance industry studies estimate that fraudulent and exaggerated claims make up between 10 and 20 per cent of all claim costs. Using those estimates, fraud and exaggeration cost ICBC hundreds of millions of dollars each year; which translates to more than $100 per year for each ICBC policyholder.
The tool can sift through volumes of information such as claims history, addresses, driver licensing, and vehicle registration data quickly, and flag possible links within the data that can alert investigators to possible indications of fraud faster, and on an ongoing basis.
A first run of data through the analytics tool reviewed all claims information for the last three years, and generated 3,300 possible fraud alerts on open claims. ICBC has reviewed the first 102 alerts, which resulted in 48 new suspected fraud investigations. It is expected that as ICBC reviews the other alerts in coming months, more investigations will begin.
Corea explains how the analytics tool might spot something potentially fraudulent. “Person A is in a car crash with Person B. Three years later, Person B is in a crash with Person C. That happens; people get into more than one crash.
“Then, a year later, Person C is in a crash with Person A. The tool will pick up that Persons A and C have the same phone number. We start doing an investigation when something doesn’t add up.”
Overstating of injuries or damage in a crash is another method of fraud, but the analytics tool is more for what Corea calls “staged crashes”. “We’ll find some alerts faster, dig deeper, and look for links. But we still need people to investigate.”
ICBC expects fraud detection and enforcement activities to reduce its basic insurance claims by $21 million for policies written over the next year. It estimates that all fraud investigation activities, including use of the new analytics tool, will save up to $44 million a year by 2019.
“We’ve completed the first run of the test, which led to the alerts,” says Corea. “It’s a pretty good tool, so we’ve signed a five-year agreement.”
“This technology is helping ICBC investigators connect the dots earlier, faster, and at a level previously not available, in cases where they think a claim may be false or exaggerated,” says Transportation Minister Todd Stone. “Fighting fraud is an important part of ICBC’s efforts to keep rates as low as possible.”