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Last year the prevention and detection

Last year  the prevention and detection of fraud was relatively low on the priority list of insurance companies in the EU. Insurers were not sufficiently focused on the cost of fraud, and thus the impact these costs have on the profitability of the business.

That’s why insurance companies didn’t  investe in the business processes, IT infrastructure and environment for the prevention and detection of fraud as (big)  banks in the EU have done . The banking sector’s modernization and rationalization costs and increase business efficiency significantly soften the fall in profitability which was largely  (and is) a result of falling interest margins.

The deregulation of the insurance market after entering the European Union has further weakened margins insurer and efficient operations set as an imperative for the future of business. Therefore, a reasonable and quite expectedly question – how to streamline operating costs, especially in the sector of non-life? One way of doing this is to improve the areas of prevention, detection and response to fraud, which can be achieved by implementing systems for fraud prevention as a comprehensive solution (see above).

Prevention

For the insurer is always most effective to prevent fraud as it would not have occurred because in this case the insurer bears the costs that may be the result of fraud (the amount of paid damages, court and legal fees, costs of private investigators, etc.). This is why insurers should make efforts that, through appropriate training, the establishment of internal policies and procedures for preventing fraud and giving importance prevention and detection of fraud by the management, lifted the level of awareness of employees about fraud and set up the basic framework for the prevention of fraud.

Detection

For  frauds, which the insurer does not stop, it is very important to be detected as soon as possible. There are several methods of detection of insurance fraud. Fraud can be detected:

-Intern logging employees or management to competent person (eg. Internal Audit, Compliance Department)

-Sign through the system for reporting irregularities and fraud, eng. whistleblowing hotline (e-mail, internal telephone line, external service)

-on the basis of the warning signs within the system for preventing fraud (which processes data in databases, eg. for damage, grants, suppliers, etc.).

It is important to note that training employees about the types of possible fraud schemes in the industry increases the likelihood that an employee identify specific fraud case. Periodic reviews of transactions on a sample basis for certain business segments (internally or through external review) is also able to detect fraud.

Reaction

It is extremely important, when fraud is detected, the reaction insurer is prompt. With the passage of time is reduced the possibility of compensation and punishment of  the perpetrators , and increases the possibility of loss or destruction of evidence. Therefore, it is crucial that the company has pre-defined plan of response to cases of fraud and allocated the resources available to ensure prompt reaction (internally or using external forensic experts). Treatment of cases of fraud and lessons learned can be used to improve the system for preventing fraud, as well as to update the response plan.

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