Study: Fraud spreading, tech helps apply brakes

Tools deployed against cyber, auto scammers to help control premiums Continue reading

tech_reportTechnology is a valued ally of insurers in combatting insurance fraud. And for good reason — this crime is growing.

These are two findings of the Coalition’s newest study of how insurers use tech to combat billions of dollars in fraud each year.

The study is one of the surest barometers of progress in how insurers wield technology against fraudsters. It’s also a window into scams that most concern property-casualty insurers, and how they’re responding.

Fraud is climbing, more than 60 percent of insurers say in the study. Cyber-fraud is a newer problem area that insurers are using tech tools to combat.

Technology is especially adept at helping uproot auto-insurance scams — long among the biggest losses inflicted on insurers. High auto premiums are an emotionally charged issue for many consumers. Analytics help keep auto premiums more in line by controlling bogus crash claims. This does a service to drivers who pay their premiums honestly.

Organized rings, crooked medical providers and drivers who falsely register vehicles in other locales to lower their auto premiums are priority schemes analytics play an important role in counting, the study shows.

Fraud-busting tech plays an ever-growing role for insurers. Tech seems to have turned the corner internally. Anti-fraud departments have done a good job of selling upper management on the business benefits of tech in helping stem large losses. Fraud fighters see less need to keep justifying tech, and fully one-third of insurers expect larger IT budgets in 2017.

Predictive analytics — which can forecast the likelihood of certain fraud crimes — continues rising as a star player. Powerful software also helps insurers automate detection of false claims, thus making fraud-busting faster and more-efficient than ever.

For all the gee-wiz headlines that cool tech breeds as a kind of new-era fraud-busting messiah, we should remember that tech tools are mostly buckets of code and data until humans make sense of the findings.

More to the point … fraud fighters also bring an unmatched 360-degree ability to size up fraud investigations from every angle — digital and street-level — to reach correct conclusions about claims. Nor am I aware of software programs grunting through a home’s blackened rubble for a possible insurance arson.

Analytics also are more than just hi-IQ data crunchers. Anti-fraud tech helps insurers serve the ultimate master: policyholders. Claims can get resolved faster and more accurately. Premiums are better controlled. Honest policyholders have a better experience, and fraudsters have a worse one. That’s what insurance should be all about.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Lemons or lemonade?

First P2P insurer says it will slash fraud costs Continue reading

Lemonade_appDo insurance consumers have a thirst to buy policies using their smartphones? Will they be less fraud-prone knowing some of their excess premiums get donated to charity? And will the prospects of quick claim cash motivate them to switch carriers?

One new insurance startup is betting yes, offering to quench that thirst.

Lemonade, the first so-called peer-to-peer insurance company, debuted this week to much fanfare.

Started by technology entrepreneurs, the company is targeting smartphone users by offering ease-of-service transitions and cheap prices on homeowners and renters coverage.

Lemonade says most insurance “sucks” (their words) because insurers hassle claimants, are bloated and make too much profit. And thus, claimants are more likely to file inflated or fake claims.

The company says it will undercut traditional insurers by using streamlined, tech-oriented transactions and reduced fraud costs. In an interview this week, Lemonade president Shai Wininger said:

“With insurance, over 90 percent of the fraud is perpetrated by supposedly normal upstanding citizens like you and me. So what is about insurance that brings out the devil in us? Why is it that when it comes to insurance, we feel entitled to break the law?” 

Research suggests consumers are less likely to defraud a company they feel good about. Customers designate a favorite charity to receive their share of company profits at the end of the year, if there are any.

Call me skeptical, but I doubt Lemonade’s approach will make that much difference in policy pricing.

Still, Millennials who love transacting business on their cellphones and are socially conscious should be drawn to this model. It will be interesting to see if Lemonade has a magic formula to reduce fraud. We’ll be watching to see if this new player leaves a sweet or sour taste in the mouths of its customers.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Feds to snoop in private payroll data for disability cheats

New law could threaten privacy and be a headache for businesses Continue reading

Congress recently passed legislation to shore up the funds dispersed to Social Security disability recipients. Included is a four-page bill allowing the feds to check private payroll data and see if people on the disability rolls are double dipping by collecting while working.

The provision is a sound fraud-detection tool that also would deter ineligible people from stealing benefits.

But concern is emerging about potential unintended consequences. Privacy advocates question whether giving the Social Security Administration the power to datamine private payroll might lead to fishing expeditions and abuse.

Business groups worry that requirements might impose a burden on employers to provide the data. Plus, they’re concerned about lawsuits filed by workers for sharing confidential payroll information.

The devil will be in the details when the SSA drafts regulations to implement the new law. The Coalition will review the regs when published. We’ll encourage regulators to balance the potential anti-fraud benefits against concerns by those that may be affected negatively.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Comp systems may miss boat in sticking with ICD-9

Uniform medical codes can help detect fraud across insurance providers Continue reading

Come October 1, medical providers and health plans across America will be using a new medical coding system — ICD 10. The codes are much more detailed for billing for specific treatments and procedures. The new system will help perfect reimbursement, aid medical research and could improve medical outcomes.

The new codes also should help better detect scams once medical billers, insurer data systems and fraud fighters learn to effectively use thousands of new codes.

Unfortunately, half of state workers comp systems plan to stick with its predecessor — ICD-9. A big reason likely is the large cost of updating to ICD-10. But in the longterm, it may be pound-foolish not to switch over. They won’t be able to share claims data as easily with other systems to help track fraud trends and pinpoint treatment areas vulnerable to fraud.

The Healthcare Fraud Prevention Partnership recently conducted a study using code combinations from Medicare, health plans and property/casualty insurers. The data analysis resulted in significant savings for all. Each could focus on specific treatment areas that previously failed to appear on anyone’s radar. Fraud was detected more easily and false claims were refused.

Workers comp in the 26 states sticking with ICD-9 should reconsider. Sooner or later, they’ll have to make the upgrade. Might as well bite the bullet now and and join the rest of the medical and insurance communities — and reap the benefits.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Let’s armor instead of oppose electronic health records

Rising technology can better catch shysters who find gaps in the system Continue reading

A recent column by syndicated conservative columnist Charles Krauthammer mourns the federal requiring of electronic health records. Doctors are leaving the profession because they can’t keep up with record-keeping requirements, he says.

“Virtually every doctor and doctors’ group I speak to cites the same litany, with particular bitterness about the EHR mandate,” writes Krauthammer .

Besides, the electronic data highway makes it easier to commit fraud by cutting and pasting false info into data fields, the columnist writes.

Reminds me of the same futile complaints when desktop computers started replacing typewriters back in the early 1980s. The strange new technology would ruin the efficient manual record-keeping of office staffers using their trusty IBM Selectrics, the cry went out in many circles.

Doctors also have complained about paperwork ever since large medical groups began buying up small practices and implementing streamlined software and tighter procedures to make their practices more efficient and protect against scamming.

There may be at least some grain of truth to the complaints. But hardly enough to stop the inevitable march of progress. The best doctors will adapt. The best crooks also will find gaps in the electronic networks; that’s what they do well.

High-gear technology such as predictive and predictive analysis increasingly also is arming fraud fighters with tools to better uproot the best-hidden crimes. Investigators are poised for a potential revolution in how they uncover medical and health-insurance schemes. This is especially true of long-abused Medicare, which is connected to the electronic-record highway like Siamese twins.

So instead of taking the Luddite path of decrying the electronic highway, let’s continue armoring the system against insurance shysters. We make progress by, well, making progress work for us.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Technology coming of age as anti-fraud weapon

More insurers are using advanced tools, but success still relies on investigator instincts
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Insurer use of anti-fraud technology has rapidly moved forward in the last few years. Time and time again, these weapons have proven to be game-changing tools for investigations of all kinds.

This is especially true of large and complex rings such as no-fault medical mills that pile up expensive and false crash-injury claims against auto insurers.

Tech software can quickly churn through imposingly large amounts of evidence and expose the structure and inner workings of often well-insulated fraud cartels. The door thus is opened to major busts, devastating prosecutions, and large-dollar savings that help control premiums for honest policyholders.

The maturation of technology use by insurers was confirmed by a study released this week by the Coalition, with assistance from the business analytics firm SAS.

Nearly all insurers (95 percent) said they use anti-fraud technology, compared to 88 percent when the study was first conducted in 2012.

Suspicious activity has increased, the responding insurers say. So the need for technological wingmen is stronger than ever.

Insurers also appear to be making a strong business case that technology returns a strong ROI. More case referrals, better ones and improved investigator efficiency were among the chief business benefits, large percentages of insurers asserted.

And more insurers are using advanced weaponry such as link analysis, predictive modeling and text mining.

Technology has moved miles ahead of the early days when it could only sift through basic clues for case leads. We’re now in the modern era. Advances in technology finally may be starting to get keep pace with America’s fraud wave, and possibly start getting ahead of the biggest offenders.

Measuring progress with precision is impossible. Nor is technology alone the solution. Insurers need to continue supporting the acquisition of modern tech pistons for their investigative units. Investigators, in turn, are challenged to keep making a strong business case for these tools.

Software developers must deliver viable tools — and make them as affordable as possible. The best weaponry must be within reach of as many insurers of all sizes and diverse investigative needs as possible.

Breaking open fraud crimes of all stripes still comes down to the keen instincts and training of investigators. They must properly interpret and doggedly track down the evidence that tech uncovers.

Human and digital boots on the ground can be an imposing team, one that more fraudsters will come to fear in the years ahead.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

One way ACA may aid p/c insurers

New entity to validate efficacy of medical procedures may reduce costs
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Why do property/casualty insurers sometimes pay for questionable medical procedures that Medicare and health plans routinely deny?

In part, auto, workers comp and liability carriers are subject to state laws that require them to reimburse medical providers for sketchy procedures. And in other cases, insurers don’t have enough evidence that such procedures are more for enriching doctors, clinics, hospitals and labs than for the health of the patient.

But thanks to the Affordable Care Act (ACA), insurers may have more evidence to deny costly and unnecessary treatment in the future.

The ACA helps fund an entity called the Patient-Centered Outcomes Research Institute (PCORI), whose mission is to find out what really works and what doesn’t in healthcare. With access to electronic medical records, PCORI will be able to analyze mountains of data and pinpoint ineffective procedures that do not lead to the best health outcomes.

As a Washington Post editorial Sunday asks, “Should you get surgery for your back pain or stick with physical therapy? When is heart surgery preferable to drug treatment? And which drugs should you take?”

Unneeded treatment, tests and drugs cost the healthcare system billions of dollars each year. PCORI has potential to bend the cost curve and reduce medical costs — for government, health plans and, yes, even property/casualty insurers. Carriers should follow PCORI’s work closely and see how it can potentially reduce loss costs, lower fraud and help keep property/casualty insurance affordable.

About the author: Dennis Jay is executive director of the Coalition Against Insurance Fraud.

Software not soft on fraud

BLOG_mailAs crime increasingly becomes the domain of organized gangs, crime fighters of all stripes are deploying ever-more-powerful technology to discover and break down their shady operations.

Credit-card firms, for example, rely on software that’s extraordinarily skilled at mining vast piles of granular data for suspicious buying patterns. I was refueling my car at a gas station in Washington, D.C., where I live. The pump apparently refused my card because the gas station was located about half a mile outside of the cluster of stations I normally frequent.

The same card refused my purchase at an athletic-clothing store in downtown D.C. likely because I normally shop uptown. So it was no surprise that my alert credit-card company recently called me at my office in D.C. to ask whether I’d just purchased baby clothing in Riyadh, Saudi Arabia.

The software was remarkably sensitive at detecting minutely deviant buying patterns. And it caught those anomalies in real time, down to the second. Unreal.

Insurance fraud fighters are seeking the same technological edge. Insurers as a whole have yet to reach the remarkable sophistication of credit-card companies, but they’re working steadily in that direction.

They need to. Organized gangs are infiltrating the insurance fraudscape with growing force. I no longer blink when I read about a $50-million or $75-million Medicare scam. A staged-crash gang in New York allegedly tried to steal $400 million from auto insurers. Many of these same gangs are probably trying to work over credit-card companies, banks and other enterprises.

The encouraging part is that that nearly half of insurers use advanced fraud-catching software such as predictive analysis, text mining and datamining. The discouraging part is that nearly half of insurers don’t use these tools.

That’s one conclusion that can be drawn from a new study of insurer use of technology. It was conducted by the Coalition, with assistance from the business analytics company SAS.

Software of this high-impact ilk is capable of near-miraculous work by today’s standards. Predictive analysis in theory can catch suspicious insurance transactions in real time − instead of waiting until the insurer has paid the claim and the trail is growing cold. Text mining can pore through volumes of relatively mushy data such as an adjuster’s sketchy field notes.

The insurers who use these tools are better armoring themselves against false claims from serious criminal elements who are making a graduate-degree science of scamming. It’s a science that’s raising premiums for honest policyholders. These insurers have made an institutional decision that fraud is a significant enough drain on their and their policyholder resources to require this level of technology.

Not all insurers routinely face a caliber of crime that requires the often-expensive investment in such software. But with several thousand insurers in the U.S., it takes little imagination to conclude that more than a few insurers could and should use these tools but have yet to reach that needed decision. That’s the discouraging part.

The Coalition’s study tells us other things about insurer mindsets regarding technology, and the crime it’s supposed to catch. A large swath of insurers are wide awake to the oncoming peril of organized crime: More than half say the chief benefit of technology is to catch such fraud rings.

Nearly all insurers use at least some form of anti-fraud software.

Predictive modeling and text mining are the top two areas in which insurers plan to invest in the future. But one of the thorniest barriers to fully investing in technology involves how to prove these tools are worth the investment, the insurers say. How do you quantify, for example, the value of dishonorable claims that are never made because some criminals don’t want to take on an insurer that’s known to be so well-defended?

Insurers as a whole may still be playing catchup with their brethren in the credit-card industry. They need, with growing urgency, to step up the pace. But the encouraging part is that more insurers appear to be taking those steps against a criminal underworld that grows more sophisticated and greedy with each passing month.

About the author: Jim Quiggle is director of communications for the Coalition Against Insurance Fraud.

Lie detection technology and fraud

liarEngland is a longtime user of voice-stress analysis, the system that’s touted to detect when someone strays from the truth. British insurers as well as government agencies have used the technology to question claimants: it detects changes in voice stress, supposedly a reliable indicator of lying.

The technology has its supporters — and critics — on both sides of the Atlantic. There has been little published data to indicate how well the technology works with insurance claimants.

One borough of London recently released data on the first 1,000 disability claimants on which the technology was tested. Of the 1,000 subjects, 43 — or 4.3 percent — were flagged by the system and all of these were found to have filed false claims or displayed a high potential for committing fraud.

Even more impressive: Another 281 claimants withdrew their claims after they learned about the use of the technology. The withdrawal rate is twice what it was before the technology was used.

So users now claim that voice-stress analysis is not only a detection tool, but a deterrent as well.

Officials say no claim is ever denied solely on the basis of voice-stress analysis, but it does help to direct investigators to claims that merit more scrutiny. It’s also said to help speed claims payments to truthful claimants.

So, is America ready for this technology? In an age when cameras catch red-light violators and the FBI can monitor phone calls and e-mail at will, perhaps Americans would accept this technology — if it helps to keep premiums in check.

I’d like to see the results of more thorough testing first.

Can MRIs really detect lies?

brain scanI have much faith in technology and believe someday scientists will develop a lie detection method that is nearly foolproof and practical for fraud fighters. Every few years a new method promises to be the holy grail of determining deception, but the hype rarely lives up to reality. We’ve seen everything from truth serum to polygraph to voice-stress analysis, but none has been deemed worthy enough to be accepted by courts as evidence in a criminal trial.

The latest method to create a buzz is the “No Lie MRI,” a system used to measure physiological changes in the brain, which when analyzed, can determine whether someone is lying, according to the owners of the system. In fact, they claim 90% accuracy in recent tests, and are now signing up MRI centers across the country to offer this new service.

The technology came to our attention after we learned an accused arsonist in South Carolina used the system to try to clear his name. Deli owner Nathan Harvey was accused of torching his business, and even though criminal charges had been dropped, his insurer refused to pay his claim. Harvey thought maybe the MRI scan results just might convince the insurer of his innocence. No word yet on whether his claim will be paid any time soon.

Nonetheless, the idea of this technology is intriguing, and if it works, could have widespread application from fraud to interrogating suspected terrorists. It also may pose opportunity since the technology is located in MRI centers. Perhaps insurers could ask their medical billers to undergo the tests to determine whether they are inflating their claims?