UNDERWRITING

Insurers seek out AI to crack down claims fraud

Fraudulent claims eat into over 25 per cent of earnings in the underwriting industry.

In Summary

•General insurance business underwriters reported a loss of Sh1.26 billion compared to a loss of Sh2.67 billion the same quarter last year

•While motor private and medical business classes are the largest, they are also among the most loss-making businesses in the industry

A car crash site
A car crash site

Underwriters need to increase uptake of digital measures to curb insurance claims fraud, a report has shown. 

According to the East Africa Insurance Outlook report for 2019/20 by Deloitte, technology such as Artificial Intelligence can be able to detect and analyse emotions in written and spoken word as well as other anomalies to detect fraud in the insurance industry.

The report shows that while motor private and medical business classes are the largest, they are also among the most loss-making businesses in the industry.

This has resulted in fraudulent claims eating into over 25 per cent of earnings in the underwriting industry.

“Insurers could investigate other emerging business classes that have a potential for growth to diversify their business mix,” the report stated. “Alternatively, insurers need to investigate means of reducing the loss ratios on the large business classes using big data and AI.”

For instance, Kenindia Assurance has taken steps to curb the fraud by incorporating AI in its motor insurance claim processes.

The insurer says AI use will fast track its claims resolutions through the use of anomaly detection, sentiment detection, text analytics and a self-service portal.

Kenindia Assurance, deputy general manager Joyce Mathenge said motor insurance is the main contributor to insurance fraud, hence the need to develop mechanisms to lower their risks.

“With more Kenyans owning cars and motor insurance being mandatory, we find that having ineffective due diligence processes and a corruption culture usually leads to motor fraud,” she said.

The firm is also looking to set up a data centre where customers’ insurance history will be keyed in with the aim of detecting motor insurance fraudsters and their methods.

This will be in addition to the industries Integrated Motor Insurance Data System (IMIDS) through the Association of Kenya Insurers which has made it possible to track the insurance history and claims of all vehicles insured in the country.

“We will now be able to further shorten our claim processes, validate all claims and pay our customers the correct claims, faster,” she said.

The Insurance Regulatory Authority data for the second quarter shows general insurance business underwriters reported a loss of Sh1.26 billion compared to a loss of Sh2.67 billion the same quarter last year.

This was driven by a reduction in insurance claims, which fell 1.27 per cent to Sh28.84 billion compared to Sh29.21 the previous year.