It’s no secret that insurance fraud is on the rise — not just this year, but for the past three years in a row. Two-thirds of insurers report that fraud risks have become one of the greatest threats to their business. And now, scammers have taken that threat directly to the insurance contact center.

Contact center fraud has increased by 350% over the past decade and was up nearly 40% in 2020 alone. With contact center-based fraud costing operators upwards of $500 per transaction, it’s high time to learn how to effectively identify and mitigate insurance fraud in the contact center.

2022 State of Insurance Fraud in the U.S.

Insurance fraud has rapidly become a significant threat to corporations and consumers alike. While contact center operators are often left footing a bill of $500 or more for fraudulent transactions, American consumers ultimately spend more than $308.6 billion per year on insurance fraud costs.

This amount encompasses annual fraud estimates across various liability areas, including:

  • Life Insurance ($74.7 billion)
  • Health Care ($68 billion)
  • Property and Casualty ($45 billion)
  • Workers Compensation ($34 billion)

Take a look at the state of insurance fraud across popular health, property, and casualty insurers.

Life Insurance Fraud

No other insurance scam costs corporations (and consumers) more than life insurance fraud. From the embezzlement of insurance premiums to the theft of insurance company assets, fraud can occur during the process of buying, selling, using, or underwriting life insurance. The Federal Bureau of Investigation (FBI) estimates that fraud costs the average family up to $700 per year in premiums.

Health Care Fraud

The National Health Care Anti-Fraud Association (NHCAA) estimates that health care fraud is equivalent to 3% to 10% of total health care expenditure and responsible for annual financial losses between $68 billion and $300 billion. Included in this figure is medical identity theft or when a criminal steals a victim’s personal data, like name and health insurance numbers, to seek treatment.

Property and Casualty Fraud

Property and casualty fraud refers to auto, condo, homeowners, and renters insurance. Auto insurers, in particular, lose at least $29 billion per year just to ‘premium leakage’ or when misstated or omitted underwriting details lead to inaccurate rates. Another common type of property and casualty fraud is salvage fraud, which frequently occurs after natural disasters like flooding.

Workers Compensation Fraud

Up to 2.1 million workers are misclassified for compensation every single month. Misrepresented employees who are paid lower premiums, employers who apply for coverage under different names, and care providers who upcode or bill for unperformed procedures are all considered examples of workers compensation fraud. Such schemes rake in billion-dollar fraud bills each year.

Top Challenges to Combating Insurance Fraud

Though fraud has long been an issue among the insurance sector, a general rise in cybercrime and the use of digital tools to commit scams have left insurers particularly vulnerable. A recent survey of fraud attacks on contact centers found that 58% of operators reported an increase in the use of call spoofing, when scammers falsify information transmitted to a caller ID to impersonate customers.

Cybercriminals have also increasingly begun to use virtualized calls to interact with contact center agents and gain access to customer accounts. More than 50% of contact center operators have observed an increase in virtualized call services. Likewise, more survey respondents have cited the contact center as the original source of criminal misconduct and fraud than ever in previous years.

On one hand, the global COVID-19 pandemic did create the ideal conditions for cybercriminals to target contact centers. Between record call volume to the contact center and an accelerated transition to remote work that left agents without robust in-house software, the pandemic wedged several gaps into contact center workflow that made insurers specifically vulnerable to fraud.

On the other hand, one could argue that the top challenges to combat insurance fraud at the contact center level have existed long before COVID. Insurers continuously report limited IT resources as a primary challenge for deploying fraud detection technology. Another 64% of operators name data integration and poor data quality as implementation barriers for sufficient fraud detection tools.

Technology to Limit Insurance Fraud in the Contact Center

Insurance fraud might be on the rise in the contact center, but fortunately, the use of fraud detection technology is, too. An incredible 96% of insurers now use anti-fraud technologies to detect claims fraud, just under two-thirds (65%) use these technologies within the new business process, and almost 4 out of 10 of insurers are currently utilizing identity verification solutions.

A variety of technology can help operators detect fraud, combat misconduct, and close any gaps that could allow for suspicious activity. They all have one thing in common: artificial intelligence (AI). AI-powered cyber fraud and identity verification technology are predicted to be the future of fraud prevention in insurance, with the majority of insurers ready to deploy within the next two years. 

More than half of insurers have an in-house-built system of cyber fraud technologies, including:

  • Automated Red Flags (88%). Detects discrepancies in the claims cycle, such as duplicate VINS, odometer inconsistencies, and multiple filings for the same damage.
  • Predictive Modeling (80%). Analyzes historical data, variables, and trends to aid in a smarter fraud score algorithm.
  • Exception Reporting (51%). Isolates behaviors or activities that deviate from the standard for further investigation.
  • Texting Mining (65%). Extracts information from various written sources via word search and sentiment analysis to identify potential fraud risks.
  • Photo Recognition (40%). Detects whether a photo of damage has been digitally altered or submitted previously on other unrelated claims.

Another addition to an in-house-built system of cyber fraud technologies is an AI-powered Real-Time Guidance tool. Real-Time Guidance packs a major bang for its buck for insurers with limited IT budgets, as it can be used to enhance call flows, accelerate discovery, and flag potentially risky or noncompliant language to help agents easily identify and eliminate fraud risks on the floor.

Similarly, an AI-enabled Real-Time Coaching solution can equip agents with robust training to become a true line of defense against potential fraud risks. Real-Time Coaching allows contact center managers to support their agents in make-or-break moments, help agents remain mindful of suspicious behavior, and guide agents through de-escalation strategies for risky interactions.

Fight Insurance Fraud in Real-Time with Balto

Are you tired of navigating the same insurance contact center challenges with the same budget and financial constraints? You’re not alone. Nearly 70% of insurers will face flat funding over the next 12 months, with little to spare for fighting fraud. Fortunately, it’s never been easier to combat cybercriminals and scammers than with one real-time product suite like Balto.

Consolidate your tech stack for fraud detection, claims compliance, and customer experience under one trusted Real-Time solution.Book a demo today to learn how to fight fraud with Balto.

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