SIU Today Fall 2021 - 7

The people in the profession have always done an incredible
job minimizing fraud, given the capabilities they had.
However, the challenge to maintain pace with the threat
of insurance fraud is very significant, as fraud detection
is, at times, beyond mere human ability. Ever-increasingly
sophisticated individuals perpetrating insurance fraud are
functioning on a larger scale than ever before. The growing
size and scope of their operations, and the pace by which
these individuals are coming out with new scams, has rapidly
accelerated. Investigators simply cannot keep pace with the
growing level of insurance fraud and relying on intuition and
years of experience alone isn't enough, evidenced by the fact
that fraud continues to grow year after year.
Simply stated, insurance fraud investigators cannot begin
to staunch fraud losses in any significant way unless their
employers invest in Artificial Intelligence (AI) technology.
This technology gives investigators the ability to process and
analyze the incredible amounts of data that is available about
claims, claimants, various third parties, providers, and all the
individuals involved.
AI augments the human ability. Analyzing claims data with
AI is one method by which insurance industry leaders fight
fraud because AI is proven to be an incredibly effective tool for
crunching numbers and computing. If it does what it's supposed
to do, it creates financial value. However, insurance companies
are unlikely to successfully implement AI systems if there is not
a high level of trust and explainability.
" When it comes to fraud detection, AI helps
the investigator determine whether a claim
is fraudulent or not, but it doesn't end with a
designation of fraud or no fraud. AI provides
contextual guidance which explains why the
claim could be fraudulent. "
Fraud investigation, like the rest of human life, is messy. It's not
just about adding autonomous decision-making technology to
the fraud investigators' arsenal. When it comes to fraud detection,
AI helps an investigator determine whether a claim is fraudulent
or not, but it doesn't end with a designation of fraud or no fraud.
AI provides contextual guidance which explains why the claim
could be fraudulent.
Insurance companies must articulate how they ensure that
the AI isn't contributing to discrimination, whether that's
racial, ethnic, economic, age-based, religious, or otherwise.
Insurance companies need to be able to explain - human to
human - how they use automation and AI to make decisions
when it comes fraud detection. If the insurance fraud
investigator using AI were to deny claims due to fraud, and
a case ended up in front of a regulator, industry association
and/or court, there are legal implications.
In fact, insurance companies are increasingly scrutinized by
legislators and regulatory entities to show, and in an increasing
number of cases, legally prove, that AI in the insurance industry
does not support systemic bias nor lead to decisions based upon
improper data or improper considerations.
The State of Colorado passed
a bill (2) that gives the state
commissioner of insurance
the power to examine an
insurer's use of external
data sources, algorithms,
and predictive models to
investigate and enforce laws
that prohibit an insurer from
considering an individual's
race, color, national or ethnic
origin, religion, sex, sexual
orientation, disability, or
gender identity in any
insurance practice (including
fraud prevention).
Also, it's important to be able
to explain how the technology
works to the investigators,
adjusters, and examiners
using the system.
In order
to build trust and keep up
morale, team members need
to understand how AI is
interpretable and how it helps
insurance companies make
valid decisions.
AI bolsters employees'
abilities which enables
them to optimize
fraud detection and
At the most basic
level, AI done right
supports the creation
of transparent systems,
so that when the
investigators do decide
a claim is potentially
fraudulent, customers
might ask... " why
was my claim denied
payment? " .... and the
insurer will be able to
justify why the decision
was made.
" AI is really becoming table stakes in the
insurance industry when it comes to fraud
prevention and investigation. However, it is no
longer good enough just to say that we're using
AI: it's imperative to pay heed to transparency
and explainability in the use of AI, fairness, and
most certainly, accountability. "

SIU Today Fall 2021

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