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How to Spot Potential Fraud Before It Hits Your Book

By: Michael Gaughan
Vice President, TransUnion Insurance Solutions
The Insurance Information Institute estimates that fraud accounts for 10 percent of the property/casualty insurance industry’s incurred losses and loss adjustment expenses – about $30 billion annually. Personal passenger automobile carriers are in the extremely difficult position of managing fraud while providing fast and fair claim settlements to their honest policyholders.

The key to avoiding the payment of fraudulent claims is to identify the small percentage that have a high likelihood of fraud and take action quickly – as soon as possible after the first notice of loss. TransUnion Risk Verification Platform enables you to do just that by delivering smart, actionable results in real time through a hosted environment.

Risk Verification Platform focuses on four areas: identity, vehicle history, other adults in the household, and carrier-specific data interfaces. It accesses identity information by interrogating comprehensive, current information sourced from multiple independent databases. Using advanced match logic, it then verifies identifying data with the highest probability of accuracy.

Risk Verification Platform contains some of the most complete and up-to-date information available for vehicles. In real time, it can deliver brand histories, junk, salvage, flood, fire and rebuilt titles. For one group of preferred carriers, approximately one in 50 applications was found to include vehicles that had been rebuilt. Recent accident information is also available, including collision damage estimates and those that resulted in vehicles being declared a total loss. In fact, six out of every 1,000 applications included automobiles that had a repair estimate for collision damage in the previous 90 days.

Risk Verification Platform can be customized for each carrier. Decision logic is configurable and can be set by state, line of business and other criteria important to the carrier. The ideal integration is online at first notice of loss where it can identify conflicting or problematic information provided by the claimant.

The following validation examples are from carrier-provided data on policies processed through Risk Verification Platform. In these instances, the value and benefit is readily apparent.

Example 1 - Multiple Identity Issues

An applicant insured a single vehicle on March 10, 2009. Two weeks later the policyholder filed a claim.

When the data for this policy was processed through Risk Verification Platform, several significant issues were identified. No relationship was found between the name and address and, in fact, the address itself was not found in any database, indicating potential fraud. Additionally, the phone number provided was found to be a landline more than 150 miles from the applicant’s address.

This claim clearly warranted the attention of a seasoned SIU investigator.

Example 2 - Serious Vehicle Questions

A carrier issued a policy that included two vehicles. A total loss claim was filed on one of the vehicles just three days after the policy was issued. A second claim was filed on the remaining vehicle two months after the first claim was paid.

When screened through Risk Verification Platform, the carrier discovered that the first vehicle was branded as having been dismantled seven months before the policy was issued. Five months later, the dismantled vehicle, or at least the VIN for that vehicle, was issued a rebuilt title. That VIN was used two months later to apply for the policy.

Had the carrier used Risk Verification Platform during the claims process, it would have been alerted to these potential issues on the first claim. The carrier could have investigated that claim and most likely denied it, making it even less likely for the second claim to be filed.

Example 3 - Multiple Policies with Potential Existing Vehicle Damage

The following examples are policies revealed by Risk Verification Platform to cover vehicles had received a damage repair estimate in the days prior to the application.
  • Policy A: Issued on 3/6/2009
  • Policy B: Issued on 3/7/2009
  • Policy C: Issued on 3/7/2009
  • Policy D: Issued on 3/14/2009
If the carrier had been using Risk Verification Platform and any of these vehicles were included in a claim, the carrier could take action to ensure the damage in the claim was legitimate before payout.

Risk Verification Platform decreases losses by verifying critical data early in the claims process. It enables carriers to identify claims that require more attention and delivers instructions to guide adjusters in the critical steps of the process. Risk Verification Platform helps carriers provide superior claims service to their good policyholders while driving out fraud operations.