Fraudulent P&C Insurance Claims on the Rise in Europe, Accenture Survey Finds
Accenture estimates industry in Europe loses €8-12 billion annually due to fraudulent claims
LONDON; June 12, 2013 – More than two-thirds (71 percent) of claims executives at European property and casualty (P&C) insurance companies have seen an increase in the number of fraudulent claims over the past three years, according to findings of an Accenture (NYSE: ACN) survey of more than three dozen P&C insurers across Europe.
Specifically, respondents reported an increase in the number of fraudulent claims of 10 percent, on average, over the past three years. The survey also found that more than one-third (39 percent) of claims executives believe that roughly 5-10 percent of claims paid by their organizations over the past year were actually fraudulent, but went undetected because of inadequate detection capabilities.
“We estimate that annual losses related to fraudulent claims could be in a range of €8 to €12 billion for the European P&C insurance industry,” said Thomas D. Meyer, managing director for Europe, Africa and Latin America of Accenture’s Insurance industry practice and of Accenture Property and Casualty Insurance Services. “European insurers could save billions each year if they had appropriate fraud-detection tools in place. However, many insurers still depend on aging technology and insufficiently sophisticated analytics tools, which do not enable them to effectively detect fraud.”
When asked what initiatives their companies plan to implement over the next three years to better prevent insurance fraud, the one cited most often – by 76 percent of respondents – was advanced fraud-detection techniques, such as predictive modeling tools that assess historical fraudulent claims and identify predictors of fraud. Next were “better support from IT infrastructure” (67 percent) and “enhanced data collection” (61 percent).
“Claims service is where an insurer today is put to the test in terms of its ability to delight or disappoint the customer, and it is therefore a key differentiator that helps build customer satisfaction and loyalty,” said Jean-Francois Gasc, managing director for Accenture’s insurance management consulting in Europe, Africa and Latin America. “The challenge for insurers is to be able to detect fraudulent or inflated claims while processing legitimate claims efficiently and fairly. A modern core claims system is essential to achieving these objectives, by enabling further automation of certain claims processes to accelerate claims settlement time, for instance.”
The executives surveyed indicated a variety of concerns about their existing claims systems, particularly as it relates to customer-servicing capabilities. For instance:
- The vast majority (84 percent) said their systems were not flexible and modern enough to properly address policyholders’ evolving needs, such as the possibility for these policyholders to obtain information on the progress of their claims when and where they want.
- Nearly half (47 percent) said their systems don’t allow changes in system behaviors and business processes without intervention from the IT department, preventing claims handlers from more quickly and easily configuring these applications according to their needs.
- More than half (55 percent) said their core claims systems are at least 10 years old, and more than one-third (40 percent) said they rely on more than five different applications to process claims.
- Half (51 percent) said their claims systems don’t have the capacity to collect and analyze the growing volume of data available – such as insights about consumers from social media and usage data collected by means of telemetry and GPS technology – which would enable them to refine and improve claims management.
- And three-quarters (75 percent) said that the most important challenge that they face with their current claims systems is the ability to integrate new technologies that support multi-channel access.
Among the survey’s other findings:
- European insurers plan to spend €16 million, on average, on enhancements to their claims management function over the next three years.
- The top three priorities for investment are process optimization and automation (cited by 79 percent of respondents), analytics and fraud-detection capabilities (60 percent), and document- and workflow-management capabilities (45 percent).
- Of the more than one-third (37 percent) of insurers who plan to replace their core claims systems in the next two years, about two-thirds plan to do so with package software, with the rest using custom-built systems.
- In the next three years, insurers plan to process one-fourth (23 percent), on average, of first notice of loss (FNOL) operations – when policyholders report theft, loss or damage – using digital channels, such as online customer self-service. Only one-tenth (11 percent), on average, of FNOL operations are handled through digital channel today.
- All insurers surveyed have plans to enhance their claims functions in the next three years. One-third (35 percent) of them plan to undertake a claims operating model transformation, while two-thirds (65 percent) plan to implement tactical claims optimization projects.
“Although the tactical, or incremental, approach to enhancing the claims function could be quicker and least costly in the short-term, it might not properly equip insurers to cope with all of the challenges they are likely to encounter in a fast-changing market, especially with increasingly digital-savvy customers,” said Jean-Francois Gasc. “Insurers that wish to reduce losses and improve customer satisfaction should rethink their claims operating model, change it as appropriate and underpin it with core systems that allow for transformation.”
Accenture commissioned a survey of 44 European P&C insurers. The 44 respondents were C-level claims executives, including heads of claims, vice presidents of claims and claims supervisors. Interviews were conducted in person between December 2012 and March 2013. Of the 44 companies represented, 32 had net premiums written (NPW) of more than US$1 billion; 5 had NPW of US$500 million to US$999 million; and 7 had NPW of US$100 million to US$499 million. Of the 44 insurers, six each were located in France and Belgium; five each in Switzerland and the United Kingdom; four each in the Netherlands and Spain; three each in Denmark and Italy; two each in Austria, Germany and Sweden; and one each in Finland and Norway.
Accenture is a global management consulting, technology services and outsourcing company, with more than 261,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$27.9 billion for the fiscal year ended Aug. 31, 2012. Its home page is www.accenture.com.
Accenture Property and Casualty Insurance Services is a business service within Accenture’s Financial Services operating group that provides management consulting, technology and outsourcing services to property and casualty insurers. Its services are designed to help insurers achieve profitable growth though product innovation, enhanced customer interactions and reduced operating costs.
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