Technological advancement is continuously making everyday human endeavors easier to perform. Now, humans can complete tasks that take months in a matter of seconds. Similarly, the use of technology is transforming fraud detection in financial institutions. This achievement has allowed many insurance companies to apply artificial intelligence (AI) in the fight against scams.
In particular, it has become challenging to isolate fraud within the insurance industry as fraudsters are becoming clever. AI allows businesses to use experienced personnel where they are most needed. Soon, better and more effective artificial intelligence technologies will make the entire process more effective. This rise is essential as fraudulent activities such as calls and messaging exceeded 20 billion in 2019.
System Shortfall
Many financial institutions are indeed incorporating the use of technologies within their systems. However, physically having these tools within the insurance system is not as easy as you may think. Many companies are not keen to make the required investments. In particular, insurers are not investing in artificial intelligence systems. Nonetheless, many insurers expect a lot of output, which does not correspond to investments.
Compared with traditional insurance processes, technologies like artificial intelligence provide far more efficient outcomes. Insurance investigators do not have to go door by door to investigate fraud cases. Likewise, with these emerging tools, insurers can complete investigations quickly. These companies also get to save a lot of resources. Despite these advantages, it may take some time before insurance companies make the inevitable commitment.
Once artificial intelligence and other similar tools become mainstream in this industry, a new age in the insurance industry will emerge. Before then, insurers must be willing to make investments. They must be willing to contribute to the development of technologies that will revolutionize the identification and prevention of fraud.
Achievements Thus Far
In general, artificial intelligence use has not been as progressive as in many financial institutions. Nonetheless, a handful of top insurers are moving in the right direction. This movement is mostly due to the benefits offered by this technology. Some of the advantages include;
- Reduced staff movement;
- General cost reduction;
- Efficient systems;
- Improved customer relations.
In most cases, insurance companies use artificial intelligence together with digital management claim systems. These tools are paired together due to the benefits mentioned earlier.
Despite these positives, there is a reality that must be tackled. Workers that provide traditional insurance services feel threatened by emerging technologies. As a result, many within the industry are actively kicking against these changes. In order to avoid sabotage and demotivation, better rollout strategies must come into effect. This change can only be achieved when inclusive strategies that account for the role of insurance officers are used.
The resistance that exists within the insurance industry still has not limited the spread of artificial intelligence technologies. As such, more than half of the insurers in America are using AI in some capacity. This increase has been partly due to the demands of the 2021 pandemic. These conditions pushed many companies to sort for innovative solutions that will likely accelerate the entire process in the future.
Yet, the quick change has left many within the industry lacking the skill to run the system effectively. So, many fraud investigators do not know how to use such technologies for fraud management. There will likely still be individuals within the insurance industry that will refuse to get on board. Ultimately, their actions may slow down the integration of artificial intelligence and similar technologies into the system. However, such technologies will eventually integrate into the system.
Major Problems
Although businesses consider technology instrumental to their progress, some significant problems persist. Some of the major issues include:
- Lack of focused strategies;
- Lack of required expertise;
- Poor data integration;
- Limited investment.
Any of these problems or a combination can significantly limit the adoption of AI in insurance. In particular, limitations in investment prevents significant expansions of technologically based solutions. Moreover, businesses that refuse to pump resources into AI and similar tools risk being left behind by other insurers. It can also become impossible for such enterprises to fight fraud in this day and age.
Research highlights data integration and investment as the main issues stalling AI incorporation. These two problems stem from the reluctance of companies to make required investments where needed.
What the Skeptics Think
As discussed earlier, there are individuals within the insurance industry who are still skeptical about the use of AI and similar technology. Also, people consider limited human interaction, algorithmic system bias, and unpredicted behavior as their problems. Others within the sector do not use AI algorithms as there is no credible explainer content. However, most people are worried about the impact of AI on job security. As a result, many call on regulators to ensure job security as technology sweeps through the insurance sector.
Despite all the skepticism, it will take many years for AI to replace expert fraud investigators. It is expected that the industry will have sufficiently adjusted by then. Yet, experts without AI knowledge may soon lose their jobs to AI literate experts.
Definition of Artificial Intelligence
AI is defined in several ways. In simple terms, artificial intelligence describes a data tool that uses predictive analysis to continuously screen claims and questions. In addition, AI uses several statistical and data modeling tools when providing solutions.
With this tool, many AI-powered companies actively pursue insurers to embrace artificial intelligence. This push is due to the benefits offered by these technologies. With these tools, insurers can quickly detect and deal with emerging insurance fraud. Apart from the initial investment, companies can fight scams with fewer resources as the AI tools fully integrate into their systems.
Beyond dealing with fraud, artificial intelligence provides the industry with several other advantages. It allows insurers to process and resolve legit claims in due time. In addition, the quality of the entire process improves through the minimization of bias from the system. Nonetheless, the new system is still flexible enough to accommodate essential input from experts as the process evolves.
Improving Fraud Detection
In general, the rate of fraud detection is not as high as many experts would like it to be. This need makes it essential to increase the overall rate. Nonetheless, the rates vary from one insurer to another. Other factors also affect the fraud rate. These factors include:
- Company size;
- Availability of resources;
- Location of insurers;
- The type of insurance policies offered.
The lack of quality data within this industry amplifies these problems. Therefore, many companies do not have a standard baseline to measure and evaluate the performance of their reps. As a result, it is fairly challenging for firms to assess their fight against scams objectively.
Although some firms use AI and related technology to fight fraud, many workers are unfamiliar with the tools. Therefore, the lack of required knowledge makes the introduction of such measures ineffective. Likewise, most managements do not review their business models to accommodate fundamental changes to practices.
Other industrial factors that limit the smooth integration of artificial intelligence in the insurance industry include the following.
- Lack of coordination within the business model leads to communication problems.
- Most workers are not ready to accept old ideas for new methods.
- Many managers prefer to use manual processes and methods when handling fraud cases.
- The practices and methods have not evolved to accommodate emerging problems.
These problems and many others make the rollout of AI measures challenging within the insurance industry. However, there is a lot to be hopeful about. Several solutions allow firms to integrate technology in their push to minimize fraud effectively.
Mitigation
There are several solutions to the problems highlighted. Some of these solutions are discussed below.
Insurance Scam Services
There are several insurance fraud mitigation schemes in the market. One of the best is offered by Luxoft. This platform gives clients a wide range of fraud management services in collaboration with IBM. Although Luxoft has several services, FCI is one of its best.
FCI uses AI to provide a comprehensive claim and fraud management system. At the core of its operations, artificial intelligence uses data to identify, present, and categorize claims as a risk function. With the help of powerful analytics, FCI is able to provide an accurate fraud detection system. In addition, this solution goes beyond most fraud detection packages by providing reliable results.
Likewise, an insurer can easily go through the inner workings of FCI. It also allows users to see and control the variables that determine the risk of a claim.
Features of FCI
FCI has several essential features. At the heart of the operation of this solution is the automatic detection of claims classified as high-risk. In addition, the algorithm of the solution uses data from clients, companies, and third-party databases. Other essential aspects of FCI include the following.
- An automated fraud assessment system.
- Functional dashboards with several investigation tools.
- A system that generates reports about the effectiveness of fraud prevention strategies.
These features and more allow the user to have a clear picture of fraud and how to isolate it against legitimate claims. Similarly, insurance firms are able to operate effectively and efficiently despite resource limitations. In addition, a business does not have to spend extra money buying addons and other technologies for the system to work.
Yet, there are clients within the insurance sector that prefer different solutions for different problems. With Luxoft, you are sure of getting different types of solutions depending on your needs. Some of the standalone services you can get include:
- Fraud identification services within a large set of data;
- A comprehensive review of a company’s fraud response system with the aim of developing a better and more robust scam detection solution;
- Provision of support and continuous review of fraud limiting solutions.
- AI offers advice to clients on fraud mitigation best approaches based on global best practices.
Comprehending AI
Considering the basic definition of artificial intelligence, understanding it and knowing how to use it become easier. AI gives you the ability to compare and isolate data points for different types of insurance claims. In addition, it gives you the chance to assess and find aspects of your products that are vulnerable to fraudulent activities.
Once your team fully comprehends how to use AI solutions, your company can manage fraud better than any manual system. Similarly, you will continuously have access to new methods of fraud detection that take into account the business models of insurance firms.
The partnership between Luxoft and IBM gives you several features and options to work with. You get to train your workers using the latest IBM training environment (Watson) using different AI models. This partnership has allowed Luxoft to develop critical aspects of an AI system within the insurance sector. These operating units can be classified as follows.
Trust and Security
This section ensures outcomes are objective. Therefore, it tries to remove bias from the entire process of fraud detection.
Neurosymbolic System
A lot of resources have been committed to this aspect. The ideal is to develop state of art, which uses deep learning. It uses neural network technologies with symbolic systems to make artificial intelligence more effective.
Hardware
Energy-efficient AI-powered hardware is developed to provide quality fraud assessment while using minimal energy.
Engineering
This aspect mainly deals with automation. The main idea is to simplify the management and training of the entire system by using AI-based engineering systems.
Conclusion
Fraud detection is an essential aspect of the insurance sector. Over the years, artificial intelligence has gradually become an indispensable tool within the insurance sector. This change is transforming the insurance industry landscape as more companies are actively trying to include such technologies into their fraud detection systems. One such critical solution is offered by Luxoft. In particular, Luxoft offers insurance firms FCI, which operates using the IBM platform.
As it stands, AI makes fraud management more effective and efficient. Similarly, such technology will likely dominate the future of fraud management within the insurance industry.