Taking fraud detection and profitability to a new level

The digital economy is rewriting the rules for business and as today’s connected and mobile consumers embrace digital tools and online services, we are witnessing revolutionary changes in the auto insurance market. A key driver is the need to meet evolving consumer expectations. Today's tech-savvy customers are embracing digital tools and online channels to research, compare and purchase insurance products. They expect fast, convenient, secure and personalized experiences that are available anytime, anywhere, on any device.

Unprecedented technology advancements are also playing a pivotal role. Future-ready insurers continue to invest in digital platforms that tap into the power of advanced analytics, and artificial intelligence to modernize customer experiences, streamline operations and reduce costs. Leading insurers are providing real-time quotes, online claims processing, personalized product recommendations and more. Beyond game-changing consumer expectations and technology advancements is the emergence of digital-first companies that have boldly disrupted the market. These data-driven players use digital tools and online channels to offer lower premiums, faster claims processing and more-personalized products and services than traditional insurers.

Underwriting shifts to a new reality
Make no mistake – auto underwriting is being reinvented amid the adoption of digital technology, automation and data-driven decision making, with dramatic changes emerging in these critical areas:

  • Infrastructure and processes to offer precise, real-time data and smarter decision making that’s fast and accurate;
  • Strategies to incorporate new data sources and analytics;
  • Utilization of a variety of data sources, including internal data from policyholders, external data from third-party sources, even social media data to assess risk and make data-informed underwriting decisions.

Tapping into analytics to enhance decision making and profitability
The importance of data analytics to reveal trends and patterns and ultimately enhance services and outcomes for both insurers and consumers cannot be overstated today. There are a few ways in which insurers are exploiting the power of analytics:

  • Revealing trends and patterns by analyzing large amounts of timely data;
  • Improving customer experience to provide a new understanding of customers and their preferences;
  • Increasing efficiency to streamline operations and reduce costs;
  • Enhancing risk management by identifying potential risks before they result in claims;
  • Detecting and preventing underwriting fraud, reducing the risk of financial losses and maintaining the integrity of the underwriting process.

Insurers are using data to zero-in on fraud
As noted, insurance companies are exploring external data to help verify the accuracy of customer information and enhance driver evaluations. Combined with predictive modeling, external data sources are helping to single out questionable drivers. Predictive models can identify drivers with a history of fraudulent behavior or who appear to be high risk.

Tapping into data and data-based decision making will provide significant new advantages for insurers. And according to the findings of the 2023 CGI Voice of Our Clients (VOC) program ‘data to improve underwriting and customer evaluation’ was cited as one of the top business priorities for property and casualty insurance executives we interviewed. To zero-in on high-risk applicants during the underwriting stage, CGI has created two effective fraud-scoring tools: our Exported VIN Predictor and Opportunist Fraud Score. CGI’s Exported VIN Predictor helps predict the likelihood of a claim in cases where a vehicle is deemed likely to be exported out of the country. Our Opportunist Fraud Score is being used effectively to predict the likelihood of a customer misrepresenting information to exaggerate a claim amount.

CGI’s dedicated advanced analytics team is working with some of Canada’s largest insurers to validate the data elements being used in these CGI fraud-scoring tools, as well as for CGI’s Loss Ratio Score, which helps in achieving premium/loss parity and increase profitability.

Welcome to the next generation of auto underwriting
The insurance industry’s validation of CGI’s newly developed data elements – using rigorous actuarial and statistical tests – confirms their statistical value. A top-three Canadian insurer found that CGI’s Loss Ratio Score improved loss predictions by about 300% on the bottom 10% segment as ranked by the insurer’s in-house score.

These developments underscore the critical importance of precise data and advanced analytics – and the value of working with trusted partners to take underwriting success to a new level. By leveraging data to gain insights into customer behaviors, risk factors, potential fraud and other key factors, auto insurers are improving products and services, reducing costs and ultimately delivering better outcomes for consumers. In today’s hypercompetitive and fast-changing marketplace – where the pace of change is accelerating – insurers failing to respond to today’s new reality risk falling behind their competitors and losing market share. We believe that there’s no time to lose in moving to the next generation of auto insurance underwriting.

To learn more about this topic and our new data elements for auto underwriting, please feel free to reach out to our expert Santiago Villasis