Page 25 - Risk Management Bulletin Jan- Mar 2022

RMAI BULLETIN JANUARY - MARCH 2022

Various Risks links from many accounts, or a low-activity
account with strong links to a master account. It
In order to address these risks, the insurance industry
might reveal multiple claims in a short period of
itself will need to innovate and implement those
time from related parties, such as members of a
technologies which have help them at least mitigate
single family, or the classic ring associated with
if not eliminate future uncertainties.
staged accident scams.
1. Insurance Fraud
2. Economic Slowdown
The Risk:
The Risk:
The insurance services industry is at risk from
Many economists believe world recession is in the
heightened levels of fraud, including cyber fraud, as
cards by the end of 2021. But due to Covid-19, we are
criminals attempt to exploit the COVID-19 pandemic.
already entered into recession phase. Such a slowdown
could hit businesses all over the world as declining
Following recent announcements of emergency
trade, reduced earnings, cuts in capital spending and
measures, there are likely to be significant numbers of
slowed real estate activity start to bite. An economic
applications from both individuals and businesses to
slowdown could also fan the flames of trade wars and
access support schemes. Claims may be made
geopolitical risks - or vice versa.
fraudulently, but processed rapidly, with less stringent
controls than usual. If approved, funds may be
transferred rapidly and with the whole system under Consideration:
stress, recovering funds due to fraud may be a Conducting rigorous stress tests and considering
relatively low priority. hypothetical scenarios to assess a firm's ability to
weather an economic downturn can then help it
The risk of internal fraud will potentially increase due improve efficiency and productivity and find
to remote working and associated reduced oversight investment alternatives.
and challenge.
3. Cyber Attack/Data Breach:
Considerations:
The Risk:
a. Employing predictive modeling: Data and analytics
Every organization is vulnerable to cyber risk, and
could improve organizations' understanding of
industries relying heavily on digital technology to
consumer and identify factors and elements that
increase efficiency and competitiveness are in
can help prevent future fraud. The goal is to detect
particular danger.
potential fraud as early as possible in the claims
process and thus reduce payments made to
Considerations:
fraudsters.
Every level of an organization must understand the
b. Using business rules to detect irregularities:
Business rules can allow forthe identification of
anomalies or irregularities during the processing
of claims. Such rules, for example, compare claims
based on various types of fraud (individual or
organized fraud), and determine whether to have
the personnel in charge investigate the fraudulent
incidents, and if so, when.

c. Social Network Analysis: Social network analysis
has proven effective in identifying organized fraud
activities by modeling relationships between
entities in claims. For example, social network
analysis might show a high-activity account with

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