How digitalisation and automation are changing
the industry and how insurance companies can position
themselves for the future with regard to fraud
The history of insurance is a history of disasters: Fires, shipwrecks - since the Middle Ages it has been documented how people tried to insure themselves collectively against major and minor disasters, for example in guilds. In modern times, maritime contracts, fire insurance companies and, in the 19th century, the first life insurance policies emerged.
Today, insurance is an essential part of the social safety net in Germany: health, long-term care, pension and unemployment insurance, motor vehicle liability insurance and professional indemnity insurance offer people basic protection in the event of a claim. Insurance companies in Germany have evolved considerably in recent decades: Digitalisation has led to new sales channels and products, while at the same time the market has become more concentrated due to numerous mergers and takeovers. Today, there are a large number of insurance segments in Germany, including
Although the German insurance system is much more conservative than in the USA or the UK, there are also some curious policies in Germany, such as insurance against bedbug infestation or football insurance that pays out financial compensation if your favourite club is relegated to a lower league.
According to a recent study by the German Insurance Association (GDV), 19.1 per cent of all insurance policies were already taken out digitally in 2023.
This is a significant increase compared to 16.7 per cent in the previous year. The proportion of digital contracts is particularly high in health insurance (29.4 per cent).
While policyholders struggle with fires and shipwrecks, broken glass and bedbugs, insurance companies fight insurance fraud. The estimated annual loss is in the billions of euros; in concrete terms, it is said to be over six billion euros. In other words, every tenth reported claim is probably attempted fraud, which should be scrutinised more closely. In order to make such checks as accurate as possible and thus better protect yourself preventively, it is advisable to benefit from the latest technical developments in fraud defence and to use top-class ICO-LUX software.
Digitalisation is increasingly extending to the use of cloud technologies, artificial intelligence (AI) and analytics applications to automate business processes and make them more cost-efficient. However, this has a significant impact on combating fraud. On the one hand, digitalisation and automation speed up claims settlement - straight-through processing (STP), for example, allows simple claims to be processed without manual intervention. On the other hand, weak points in the systems open up new opportunities for fraud.
To counter this risk, insurers are increasingly relying on AI systems that can recognise suspicious patterns in real time. According to a study by the Fraunhofer Institute for Intelligent Analysis and Information Systems (IAIS), insurers using such technologies were able to increase their fraud detection rate by up to 30%. However, this requires large amounts of training data and excellent internal data quality. According to studies, other challenges for insurers in the fight against fraud include
Data quality and security: 56 per cent of insurers cite internal data quality as the biggest obstacle to combating fraud, followed by data security measures (51 per cent).
Lack of resources: Limited specialist staff and integration issues with existing legacy systems often hamper and delay the introduction of necessary software (54 per cent)
False positives: AI systems in particular generate a high number of false positives (35 per cent), which ties up valuable resources and can lead to customer dissatisfaction
Integration difficulties: The integration of new technologies into existing legacy systems and the training of employees pose major challenges for many insurers.
Insurance companies not only save money and time with digitalisation and automation processes. They also make themselves more vulnerable to fraud. The billions in losses every year bear witness to this and therefore equalise the savings.
All ICO-LUX products - ICO.Match, ICO.Fraud and ICO.Link - have been developed in close co-operation with insurance companies. The document recognition software ICO.Match, for example, is optimised to meet the challenges of the insurance and financial sector: Image files, regardless of their origin or format, are recognised, categorised into document classes and their content recognised. By combining artificial intelligence and rule-based technologies, the result can be individually optimised.
ICO.Match is seamlessly integrated into the multi-award-winning fraud detection and document verification software ICO.Fraud. The software helps the relevant experts in the insurance companies to recognise documents that have been altered or created with fictitious authorship. By intelligently combining various technologies, suspicious moments can be reliably recognised and followed up.
With ICO.Link, ICO-LUX also offers the possibility of exchanging information across insurance companies in a certified data protection-compliant manner, for example to detect illegal multiple insurance policies and limit the corresponding losses.
