Insurance underwriters evaluate the risks involved in insuring people and assets and establish a price for that risk, attempting to separate the acceptable risks from the bad ones. Premium leakage results from misapplying or missing any premium-affecting factor in the underwriting process. Premium leakage is defined as the premium or revenue lost due to misclassification, missed exposure, changes to exposure, fraud, or the failure to recognize material facts related to the insurance premium. That is, why it?s such a big problem for insurance companies, what a contemporary and technology-forward solution should look like, and then how to best implement and leverage an AI/ML-based approach for better fraud detection that incorporates speed and accuracy. In this series of blog posts, I will cover the ?why, what, and how? of underwriting fraud detection.
Again, according to the NAIC, fraud not only imposes costs on insurance companies and threatens their competitiveness and future viability, but it is also financially damaging to consumers and detrimental to the economy and society as a whole. The NAIC (National Association of Insurance Commissioners) estimates that fraud is a problem that impacts the industry and consumers by over a hundred billion dollars per year.
Thursday, JUnderwriting Fraud in Insurance: Why Hasn't the Problem Been Solved?įacing facts: Soft fraud costs the insurance industry billions of dollars annually, specifically in premium ?leakage,? a problem that results in artificially low premiums and unnecessary or over-inflated claim payouts.
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