A new database search system could become “a decisive new weapon to combat the property/casualty industry’s $20 billion a year fraud problem,” which includes workers’ compensation insurance. The Insurance Services Office, Inc., which is an insurance industry organization that maintains claims databases, has been working with Alta Analytics, Inc., of Westerville, Ohio, to create a powerful software tool to detect patterns of fraud. The NetMap for Claims system, which was announced in late July, allows users to cross reference 140 million auto, property and other insurance claims records from across the United States. A search on this system could turn up unusual similarities between claims filed in different parts of the country, and different types of claims such as auto and workers’ compensation, which could in turn uncover potential fraud, according to an ISO spokesman.
Insurance companies have long been using computerized databases to detect patterns of fraud, but the new ISO product is “a quicker and more efficient way” to search a claims database, said Christopher Guidette, an ISO spokesman.
“It’s more sophisticated and it’s much more powerful, because it consolidates a number of databases,” he added. “You can put it (claims) up against a lot more information.”
“The benefits to the insurer are to reduce their losses, especially if their losses don’t deserve to be paid,” he said. Ultimately it can help reduce rates for consumers if the industry is able to cut back on fraudulent claims.
Beacon Mutual Insurance Co., which is Rhode Island’s largest workers’ compensation insurance firm, now cross checks claims by submitting a form to the claims database firm it uses, said Cliff Parent, Beacon’s vice president of claims. The insurer then receives a report, which could say there are no claims that raise red flags or it could include a “hit list” of possibly connected claims, Parent explained.
“From that we would contact the insurance carrier that handled that claim,” he said. “We do occasionally get hits that prove to be fraudulent claims.”
Parent was unsure how much such computerized databases have saved Beacon by identifying fraudulent claims.
“I couldn’t tell you a specific number. I think what it does is send up a red flag. From that we can conduct an investigation,” Parent said.
One possible way ISO’s new system could help uncover potentially fraudulent workers compensation claims is by comparing auto accident claims with workers comp claims, Guidette explained.
“Sometimes somebody will have an automobile accident and file a claim against their auto insurance, then go to work and suddenly slip and report the same injury (as a work-related injury),” Guidette said.
“Property/casualty fraud costs the industry about $20 billion a year,” he added. “From studies we have done with insurers that use this system, and have been diligent in prosecuting fraud, we’ve come up with a calculation that for every dollar invested in our system there is $80 in reduced fraud claims.”
Insurance companies and self insured companies are among the organizations that use ISO’s services. Its customers include more than 2,900 insurers and reinsurers, as well as agents, brokers, risk managers, and financial services firms.
ISO’s current database is the result of a consolidation of several databases, Guidette said. In 1997, ISO acquired the American Insurance Services Group’s database and that of the National Insurance Crime Bureau to create the ISO ClaimSearch System.
Clients will be able to use NetMap for Claims software with the ISO ClaimSearch system starting in the fall, according to ISO.
“Prudential has used NetMap for Claims in combination with ISO ClaimSearch for the last six months. With them, we have been able to uncover additional instances of fraud that we may not have been able to detect as easily without this technology,” said Thomas J. Mulvey, national director of the special investigation unit at Prudential Property & Casualty Insurance Co., in a prepared statement issued by ISO. “With NetMap and ISO ClaimSearch, we can review the same number of files in about 15 minutes that would previously take three to four days of an investigator’s time.”
