In the initial post in this series on building an efficient and effective organization to fight insurance fraud, we discussed the importance of elements such as organizational structure and governance in fighting insurance fraud.

In our view, efficient fraud fighting begins with a clear description of roles.  One of the most important roles is that of the fraud investigator assigned to work on cases requiring detailed investigation to help prove fraudulent claims.  The fraud investigator supports claims handlers and others who request assistance in cases of suspected fraud.   The investigator should have a good understanding of different fraud mechanisms as well as a deep knowledge of the company’s business processes and the legal issues that must be addressed.

Another key role is that of the fraud modeler.  These individuals have the skills to design, build and test the company’s anti-fraud models, using statistical techniques such as business rules, predictive modeling and network analysis.  The fraud modelers should also be skilled in statistics and data management, and have a good understanding of the company’s approach to business processes and data mapping.

Setting up an integrated anti-fraud organization can help an insurer capitalize on its business lines’ skills and preferred practices as groups share experiences and knowledge.  This can also improve coordination and communication between teams.

With key roles identified and established, effective governance practices can be put in place.  These include:

  • Naming an individual as head of the anti-fraud department. This person helps support a clear business vision of fraud management and is deeply involved in defining the anti-fraud strategy, in writing anti-fraud policies, and in implementing and coordinating the anti-fraud framework.
  • Seeking and obtaining the board’s validation of the anti-fraud strategy.
  • Setting up a claims management unit that focuses on claims administration and client relationships, while keeping a watchful eye on potentially fraudulent behavior.
  • Involving all levels of the organization in bottoms-up approach to fraud detection and prevention.

As the anti-fraud operating model is designed, there should be full involvement of all appropriate departments including the business lines, compliance, claims, IT, risk, legal and others.  The governance body supervising anti-fraud activities should have clear responsibilities and the ability to facilitate rapid decision making.  In addition, it should have direct input from top management on ethical standards, as well as strong sponsorship and full engagement from senior executives.

In our next post we will review some of the practices that help organizations effectively manage a broad range and high volume of fraud cases.

For our latest perspectives on Fraud and Financial crime, please click here.

Other parts of this series:

Part 1: Reducing Fraud Losses Represents a Profitable Opportunity for Insurers

Part 3: Fighting Insurance Fraud: Establishing a Solid Framework

Part 4: Adopting a Proven Anti-Fraud Methodology for Insurers

Part 5: Fighting Insurance Fraud: Measuring fraud savings and benefits

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