Tens of billions of dollars—that’s how much auto insurance fraud costs policyholders and insurers every year. The pervasive (and costly) issue stems from the antiquated processes of verifying insurance claims and applications, where manual underwriting still is king in insurance verification operations. However, more and more, insurers are seeking ways to automate their auto insurance verification processes to mitigate and combat fraud. Using technology, insurance companies can collect and verify auto insurance data instantly, the cost of which is exceptionally less than—you guessed it—billions of dollars.
The cost and prevalence of car insurance fraud
In 2022 alone, non-health insurance fraud cost over $44 billion. Among that $44 billion is auto insurance fraud claims leading to increased premiums for honest policyholders and substantial financial losses for insurers from insurance payouts, investigations and litigation, and lost customers. As insurance companies fight to understand and combat fraud, there’s many different forms of fraud to look out for, some more obvious than others.
The automotive industry talks about insurance fraud in two ways—soft and hard fraud—to distinguish how the fraud is committed between insurance rates and insurance payouts.
Types of soft car insurance fraud
- Premium leakage and application fraud: omitted or misstated underwriting information, understating their driving violations, vehicle modification, missing drivers, etc. that leads to inaccurate rates.
- Phantom vehicles: Fraudsters invent non-existent vehicles and include them in policies to make claims for accidents that never occurred.
Types of hard car insurance fraud
- Staged accidents or theft: Criminals intentionally cause accidents or theft to make fraudulent claims for injuries and vehicle damage.
- Exaggerated claims: Some policyholders inflate the cost of repairs or injuries to maximize their insurance payouts.
Addressing car insurance fraud while remaining competitive
While immediate money loss is a significant effect when it comes to insurance fraud, there are even more far-reaching and devastating outcomes for policyholders and insurers alike. Strains on resources and manpower for insurance companies and the erosion of trust within the industry are significant and just as costly consequences.
Auto insurance businesses operate in an intricate landscape where they must navigate a delicate balance between combating fraud and maintaining competitiveness within the industry. With fraud posing a persistent threat, insurers find themselves compelled to scrutinize underwriting information and claims meticulously to ensure accurate rates and insurance payouts. However, this necessitates a more discerning approach when offering competitive rates to customers. Simultaneously, they face relentless competition, requiring them to provide a seamless purchasing experience and maintain strong customer relationships. Fearing rate increases or unwarranted inquiries, valuable policyholders may choose to switch insurers.
Striking the right equilibrium between fraud prevention and customer satisfaction is a formidable challenge for insurers, particularly because customer expectations run high. Vigilance against fraud in the industry is even more critical and time consuming. That’s where automation can help.
Using automated auto insurance verification to combat fraud
Automated auto insurance verification is a proactive approach to fraud prevention, involving real-time verification of insurance coverage at various touchpoints, which ensures that policyholders have active and valid insurance. This process utilizes technologies and tools like APIs, which pull real-time data from various primary sources including online insurance accounts, vehicle databases, claims data, and more. Embracing instant automated insurance verification with real-time data has many benefits:
- Improved accuracy: Automated verification reduces human error, ensuring that insurance information is up-to-date and accurate.
- Real-time verification: It provides instant confirmation of coverage, preventing coverage gaps.
- Cost savings: By minimizing fraudulent claims, insurers save substantially in time, energy, and actual payouts.
How automation mitigates different types of car insurance fraud
Preventing premium leakage and application fraud
- Real-time data validation: Some new systems can cross-reference policyholder information with external databases to verify accuracy. With real-time data verification using consumer-permission, data is collected from the primary source (insurance accounts) to validate policy information. A policy-holder’s identity can be verified in the same process with 2-factor authentication.
Detecting staged accidents, theft, and phantom vehicles
- Monitoring accident reports: Insurers can monitor accident reports and identify suspicious patterns.
- Analyzing claim data: Automated systems analyze claim data for anomalies that may indicate fraud.
- Cross-referencing vehicle databases: Insurers can verify the existence of vehicles listed in policies.
- Analyzing policyholder history: Frequent policy changes may raise red flags.
Minimizing exaggerated claims
- API-powered claim assessment: Employing APIs for real-time valuation of claims helps identify claims exaggerations.
- Historical claims analysis: Insurers can analyze a policyholder's claims history to detect unusual patterns.
5 more innovations for the automation of insurance verification to explore
The fight against insurance fraud is an ongoing battle, and technological advancements will continue to play a crucial role:
- Advancements in technology: Tech will just keep getting better, and these ongoing technological developments will further enhance automated systems for fraud prevention and verification.
- AI and machine learning: AI and machine learning allow completely remove the need for manual processes and continuously advance based on algorithms, and the internet of things (IoT). Plus, these technologies enable predictive fraud analytics, claims processing, and more.
- Blockchain for secure data sharing: Blockchain can provide a secure and immutable ledger for insurance information, preventing fraud and improving the process of verification.
- Integration with telematics and IoT: Connected devices offer additional data sources for verification.
- Insurtech: The rise of the collaboration between insurers and technology providers fosters innovation and more ideas to prevent fraud and improve industry processes.
MeasureOne’s #1 insurance data collection and verification platform
Mitigating insurance fraud through automated auto insurance verification is not just a possibility; it is a necessity in today's insurance landscape. Encouraging its adoption in the industry using platforms like MeasureOne will go a long way in curbing fraud.
With MeasureOne, your business can verify auto insurance coverage instantly and gain instant access to verify and re-verify a consumer's insurance policy to help fraud-proof your quoting, binding, claims, and underwriting processes. Using real-time data, MeasureOne provides automated access to insurance data directly from consumers’ online accounts and policy documents, ensuring the most up-to-date auto insurance information.
When you partner with MeasureOne, you also gain:
- Marketing-leading coverage/conversion: 95%+ coverage of insurance carriers and leading coverage in other data domains.
- Lowest costs in the space: MeasureOne’s platform helps you access and verify the data and documentation you need with automation, lowering your costs compared to manual processes and leading competitors.Better technology and scalability: Technical ability to deliver a one-stop-shop for your insurance data needs at all levels of integration, from no-code solutions to universal API.
Interested in more? Try MeasureOne risk-free for 14 days to see how the platform can drive automated auto insurance verification.