Insurance fraud consultant John Standish is on a mission, borne out of years of experience as an officer and investigator with the California Highway Patrol and as Chief of the California Department of Insurance's Fraud Division: Get insurance companies to embrace fraud analytics.
In particular, Standish points to social network analysis -- the modern-age equivalent of the "this person connects to this person" links he used to map out during his days as a fraud investigator. Today's fraud-fighting technology is so cool and efficient, "it almost makes me wish I was 30 years younger and working cases," Standish, principal with The John Standish Consulting Group, told me.
Such technology would have been a boon in fighting organized auto insurance fraudsters that ramped up their southern California operations in the late '90s, Standish said. Back then, success came the hard way -- years of feet on the street. As an example, he described how his team brought down a leading Russian ring in a five-year, multiagency operation that included 18 months of undercover work once the investigators infiltrated the group.
For legitimacy's sake, the cooperating insurance companies had to pay out $230,000 in claims during the duration, he noted. "With today's technologies, we could have wrapped that investigation up in a few months."
And so, Standish told me when we met earlier this week at SAS Global Forum 2013 in San Francisco, "this is a crusade I'm on."
As you might surmise, the top carriers in the marketplace -- companies like Allstate, CNA, and Farmers -- get it. They use analytics (yet can suffer from complacency, Standish noted). But these aren't the companies targeted by fraudsters anyway; those would be the second-tier, less savvy carriers, he said. "They target companies that do shoddy work and low ball 'em."
This is the wave of the future -- and if you're not using this technology two things are going to happen. One, people will steal your money and they'll be long gone before you ever know it. And two, you won't be able to compete against the companies that are using this technology.
Watch this video for Standish's best-practices advice for fighting auto insurance fraud, and share your experiences with auto insurance below. Have you ever felt you've been the victim of an auto insurance fraud ring -- rear-ended, for example? Do you think your auto claims adjustors do a good job?
I think that not only do we need access so we can view the record and make sure it is correct, but we need a procdure and way to challenge mistakes so they can get corrected. It is easy to imagine someone with the same or similar name having records mixed with yours. There may even be cases of identity theft. I think there always needs to be a m=way for a manual overide.
As an aside, it is important to check your own driving record - just to make sure you are not being unfairly assessed for an accident.
When insurance companies issue a new policy, they verify your driving record with the Department of Motor Vehicles in the state where you are licensed. In addition, they may obtain information about your insurance and driving history from other sources, including the LexisNexisCLUE (Comprehensive Loss Underwriting Exchange) Auto database.
The system functions much like a credit-reporting agency. Instead of your bill payment history, it uses your policy and vehicle information, including your claim history (dates of loss, type of loss, and amounts paid).
If your CLUE report is wrong, you may be paying too much, and you may be able to request a premium adjustment. Just like a credit report, you can get your CLUE Auto report free once every 12 months. Order it online or by calling (866) 312-8076.
@Noreen, another point Standish made during our interview is that auto insurance fraudsters have been primarily operating in highly populous areas, like southern California where he worked. And that's made smaller, less populated states and the companies that operate in those feeling a bit immune to the problem. But Standish says that's a big mistake. States like California essentially "export" insurance fraudsters. So, yes, we have to fight for every improvement as the fraudsets seeks to extend their operations.
@kicheko, you know, I asked the same question of Standish: Do the fraudsters engage big-data analytics of their own? He said, no -- they don't have the software or the infrastructure to enable big-data analytics. In fact, he said really auto insurance fraudsters are probably more unorganized than organized. There's not one traditional don or kingpin calling the shots -- they're all in competition with each other, he said. Sometimes they'll join forces for schemes, collude, and share the profits. But mostly they work on their own chipping away.
cyril, - i agree with you on that thought. Fraudsters must be doing some big-data analytics too. Though this is not to say we should give up the fight or stop improving anti-fraud analytics. If we do things will fall apart of course.
I don't think I've ever been the victim of fraud, unless you want to count the only time I had to go to the at fault driver's insurance company to get paid. They certainly knew how to drag ourt the process and low ball the settlement!
But stopping the fraudster should help get those rates down that we all end up paying for.
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