Fewer than four in ten insurers have invested in tools that support fraud detection, according to a new report.
Celent, a research advisory unit of the management consulting firm Oliver Wyman, New York, published this finding in an April report, “The Market Dynamics of Claims Fraud Detection: Deal, Functionality and Technology Trends.” Exploring the market of claims fraud detection systems, the report bases its analysis on information collected from Celent’s 2012 research profiling information technology vendors active in claims fraud.
The report observes that insurers investing in “modern and sophisticated” claims fraud mitigation tools concentrated (just under 50 percent) among mid- and top-tier companies that generate more than $1 billion annually in revenue. IT fraud mitigation vendors have signed only about a quarter of their contracts with insurers that generate less than $500 million in premium annually.
The report adds that about 60 percent of insurers plan to invest in predictive analytics, fraud and data visualization tools. More than 80 percent of them consider these three technologies “differentiators.”
Approximately one in six of the survey respondents (16 percent) rank fraud detection as a top priority. This compares with 20 percent, 16 percent, 13 percent and 10 percent who view fraud detection as priorities 2, 3, 4 and 5, respectively. Fully one-quarter (25 percent) of the insurers say fraud detection is not a top-five priority.
The survey forecasts that the claims fraud detection system market will grow at a single-digit rate until 2014. Between 2014 and 2018, “two major forces” will drive insurers to invest in claims fraud detection systems: (1) the need to improve technical ratios; and (2) adoption of Big Data infrastructure.
“We think that both life and nonlife insurance will remain tough,” the report states. “Insurers will have to act on the basics of their business to generate profit below the line.
“Our survey findings indicate that insurers consider the industry to be slow at capturing the value of Big Data,” the report adds. “But insurers’ perception of the value of data, and more particularly their need to invest in Big Data will boost investment.”