August 17, 2022

Auto Insurance Fraud Detection: How to Prevent it?

Learn about some of the various auto insurance frauds & how AI can help detect them whilst improving efficiency.

One of the most common types of insurance fraud is auto insurance scams. It is also one of the most preventable ones. Auto insurance fraud is a costly crime that can hurt businesses. With the help of artificial intelligence, auto insurance companies can get to the root of the problem and avoid paying for dubious claims. Let's look at everything about auto insurance fraud detection and how you can overcome it with artificial intelligence (AI).

What is Auto Insurance Fraud?

Auto insurance fraud is the act of intentionally making a false auto insurance claim for personal gain. It is a growing problem worldwide and can be difficult to detect. Insurance companies lose millions of dollars each year due to fraudulent activities related to auto insurance fraud.

Auto insurance service providers can lose around $29 billion annually from fake claims. Car insurance companies can at times tell if the claimant is lying. For example, if the claimant says their car got stolen but turns up at a scrap yard after being sold for parts, the insurer may detect this as fraud and refuse to pay out on the claim.

Types of Auto Insurance Frauds

Here are the various frauds that auto insurance companies usually encounter.

Vehicle Dumping

Vehicle dumping is an insurance fraud where the policyholder knowingly disposes of their vehicle. They know that their automobile has insurance coverage and look for a way to make quick money.

Vehicle dumping often involves intentional damage to a vehicle to collect the insurance claim. The vehicle then gets disposed of, either by accident or intentionally. People dump them in waterbodies and report them stolen to gather insurance money in some cases.

False Registrations

False registrations occur when someone gives incorrect information to the insurance company about their vehicle's registration details. The most common scenario is when car owners register their vehicles in other states. They intentionally do this when the place they live has a high theft rate or has costly insurance plans.

Staged Accidents

Staged accidents are a common form of insurance fraud and involve individuals or groups staging a car accident to collect insurance money. The most common method is to stage a rear-end collision because it's relatively easy to make it look like the rear vehicle was at fault.

According to the National Insurance Crime Bureau (NICB) in the US, staged accidents are rampant across the country. Insurance companies may have to pay around $2,000-$10,000 or even more per claim. It results in huge losses annually for insurance companies.

Exaggerated Repair Costs

Exaggerated costs of repairing a vehicle occur when the insurance company gets overcharged for the repair services. It can result in a higher payout for the policyholder who wants to make quick money.

Car repair shops can commit this fraud by claiming that a car's damage is more extensive than it is. People do this to make money off the repair job and earn more from the insurance company.

Insurance Agent Fraud

Insurance agents should be professional guides for their clients. They should help customers find the right coverage for their needs and ensure they are secure in case of accidents or other types of losses. Unfortunately, insurance agents can sometimes take advantage of their client's trust by committing fraud on behalf of the company they work for.

Insurance agent fraud occurs when an agent gives false information about a policyholder's circumstances or omits critical details to obtain a higher payout than they would otherwise have received. This fraud often gets committed by agents who have incentives to do so—whether it's an incentive from another employee at the company or simply because they want more money themselves.

How AI helps Detect Fraudulent Auto Insurance Claims?

Here are various ways AI can help with auto insurance fraud detection.

Identifies the Probability of Claims

Auto insurance claims are a huge problem for the industry. A lot of people will claim that they have been in an accident, but there may not be any proof that it happened. The issue is that the insurance company has to pay for those claims, and it can hurt their bottom line.

In the past, insurance companies had a hard time determining whether or not an auto insurance claim was fraudulent. People could lie about their driving experience and cause accidents. They would then file false claims for damages and medical bills. The problem was that it was difficult to distinguish between legitimate accidents and false claims.

Now, artificial intelligence can analyze data to determine the probability of an auto insurance claim being fraudulent. When used correctly, AI helps insurers with auto insurance fraud detection to save money and protect consumers from fraudsters who try to take advantage of them.

Detects unusual activities and patterns

AI is a powerful tool that helps insurers spot suspicious activity and patterns indicative of fraudulent claims. With the help of AI, insurers can identify when there is a sudden spike in claims, which could indicate something is amiss. In the auto insurance fraud detection domain, they also can detect multiple claims made for the same incident, which shows the insured is submitting false claims.

In addition, insurance companies can use AI to identify personal information about policyholders and use it as proof of fraud. For example, an insurer may determine that the policyholder's name and address do not match the one on file with their insurance company.

Monitors Activities in Real-Time

AI can help prevent fraud in the first place through real-time monitoring of users' activities. The technology allows insurers to monitor their customers' actions and flag suspicious behavior.

Auto insurance fraud detection can include an excessive number of claims submitted by a single person or unusual claims that appear to be made by someone other than the customer. This prevents false claims from being filed, leading to lower costs for everyone involved and more money for paying legitimate claims.

Improves Continuously

Artificial intelligence systems can grow smarter and more efficient over time. It is critical when it comes to detecting fraudulent auto insurance claims. As time goes on, more data gets collected and processed by these systems. They can recognize patterns that may have previously gone unnoticed.

That's why you can expect AI to be a key component in the fight against auto insurance fraud detection in the coming years. It will improve rapidly as we gather more information about how people commit these crimes and how you can prevent them from doing so again.

Automating the Auto Insurance Claims Process with AI

The auto insurance industry is one of the most lucrative sectors in the world. The global auto insurance market size will touch the figure of $1.06 trillion by 2027. It will come at a CAGR of 8.5% between 2020 and 2027. But just as with any other industry, there are plenty of people trying to get a piece of the pie without actually paying for it—and this is where the fraud comes into play.

With the rise of insurance fraud, the auto insurance industry is struggling to keep up. The industry faces several challenges ranging from fraudsters to low-quality claims management. To overcome these challenges, insurance companies can automate their processes using AI.

Automating the auto insurance fraud detection process can help insurers in many ways. It helps reduce the time taken to process a claim, improve the accuracy and quality of claims, and reduce costs associated with underwriting. AI-powered automation allows insurers to manage their customer service operations at scale by reducing human intervention. It is helpful for insurers facing an increasing number of fraudulent claims.

Leveraging IDP to Automate the Auto Insurance Claims Process

Auto insurance claims are a huge hassle for both insurers and claimants. The process is time-consuming and complicated, meaning it is easy for something to go wrong. This is where Intelligent Document Processing (IDP) comes into the picture. It can help streamline your auto insurance fraud detection process.

IDP allows you to use an intelligent system that can automatically scan documents and extract data from them without human intervention. You do not have to wait around while your employees spend hours manually processing each claim. Instead, they can focus on higher-value tasks like customer service, marketing, and sales.

And because IDP remains automated, it also helps reduce the risk of errors in the claim process by ensuring every piece of information is correct before sending it to its destination. This can save you time and money when compared with traditional methods of filing claims.

Advantages of using IDP to Automate the Auto Insurance Claims Process

Here are the various benefits on offer when it comes to auto insurance fraud detection.

Reduces the Time Required to Process a Claim

Claims processing can be time-consuming and tedious. The insurance company must receive proof of the damage and send it to their claims department, which needs to investigate the claim to ensure all details are correct. Once this step gets completed, they have to send it back to the agent, who will complete the further process.

This process can take anywhere between two weeks and a month. With IDP, however, this process can get automated. Once insurers submit their claim, they will go through the steps without human intervention. It helps reduce processing time.

Allows for Better Record-Keeping

While there are many reasons why you might want to use IDP to automate your company's auto insurance claims process, the ability to keep better records is one of the most important. This is because it helps your business comply with laws regarding how long you must keep data.

The ability to integrate your claims process with IDP can help your company manage and automate the auto insurance claims process. It will allow you to keep better records of your claims, which will make it easier to track the progress of each claim and ensure that they are getting handled correctly.

Automates Internal Processes

Using IDP to automate the auto insurance claims process can immensely benefit your organization. It can help you streamline and automate internal processes, which saves you time and money.

Automating internal processes can improve efficiency, reduce errors, and increase productivity. You will also have increased control over the process. You can ensure everything is getting done correctly.

For example, a large insurer may have thousands of claims every month and want to ensure they pay everyone on time. This can be a time-consuming process, but with the use of IDP, the company can automate this process and ensure that they pay on time without hiring additional staff or spending extra money on technology.

Things to Keep in Mind When using IDP to Automate Auto Insurance Claims Process

When you use IDP to automate the claims process, there are a few things you should keep in mind.

  • IDP cannot make up for the lack of thorough documentation. If you are not keeping good records, IDP will only help you so much.
  • IDP is a tool, not a replacement for human oversight. When using IDP, you still need people to oversee your work and make sure everything happens correctly.
  • It's vital to remember that IDP has limitations—it can't do everything a human would do in an auto insurance claims process.
  • It is critical to ensure the information you provide is accurate. If you're unsure of what happened or if you need additional details, be sure to ask your agent for help. It will prevent confusion down the road and ensure claims get processed as quickly as possible.

Bottom Line

If you are an organization dependent on loads of paperwork, it is only a matter of time before your incoming papers will outrun your ability to handle them. It can become difficult to track everything manually. In these cases where intelligent document processing solutions help streamline everything, you can realize ongoing cost savings that help manage the day-to-day operations.

VisionERA is a modern-day Intelligent Document Processing platform that helps you process documents 20x faster and allows your team to experience 3x productivity. Your document-heavy auto insurance business can benefit immensely from the smart automation capabilities of VisionERA.

It comes with a continuous learning mechanism, which means the system will keep improving over time as you feed it with more data. VisionERA also comes with plug-and-play functionality and drag-and-drop features that help your team finish their tasks within minutes.

Contact us today to know more details about VisionERA.

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