Al-Powered Investigation: The missing link in India's fight against insurance fraud

Every year, insurers lose 8-10% of their revenue to fraud, but they manage to thoroughly investigate only about 1% of fraudulent claims. This ongoing issue continues because of significant gaps in the current fraud detection and investigation practices.

- Suvajit Sengupta

Indian insurance companies lose nearly ?30,000 crore an- nually to insurance fraud-a staggering figure. When you consider that India's insurance penetration rate[5] is just 3.7%, far below the global average, this loss becomes even more alarming. Insurers lose 8-10% of their revenue to fraud each year, yet they thoroughly investigate only about 1% of fraudulent claims. This issue persists due to significant gaps in current fraud detection and investigation practices.

While checks are in place to control some types of fraud, the more sophisticated schemes require highly coordinated efforts between fraud control units (FCUs), field investiga- tors, and sometimes even local authorities. However, FCUs often lack the resources and infrastructure to handle the sheer volume of investigations efficiently. As a result, scammers can exploit weaknesses in the system, allowing many fraudulent transactions to slip through the cracks.

This highlights the urgent need for a comprehensive fraud investigation system that can aid FCUs with more efficient and streamlined field investigation to combat the evolving threat. In this article, I'll explore the key challenges insur- ers face in tackling fraud and discuss potential solutions, including the role of artificial intelligence and optimizing field operations to stay ahead of the fraud curve.

The Challenges of Manual Investigation Processes

Insurance companies in India are no strangers to the ineffi- ciencies that plague their investigation processes. Unfortu- nately, the pace at which fraud schemes are evolving-be- coming more sophisticated and complex-is outstripping the ability of fraud control units to keep up. Many insurers are still relying on outdated, manual processes and legacy sys- tems, which only serve to slow down their response times further and reduce their effectiveness.

The growing challenges in fraud investigation are driven by several key factors: