Grange Battles Organized Fraud

Fighting fraud is like shooting at a moving target. Just as fraud investigation gets more sophisticated, so do the organizations and individuals perpetrating fraud. In fact, not only do the perpetrators know which companies are tough on fraud, but they may even narrow activities down to the level of which specific adjusters to hit within an insurance company.

When industry fraud-reporting information such as this led Columbus, OH-based Grange Insurance Co. ($956 million in assets under management) to think that it was not fighting fraud as effectively as possible, it looked for a way to reengineer its fraud-response capabilities. "We formed a project team a little over a year ago to take a look at all our processes for the identification of potentially fraudulent claims," says Mark Russell, vice president claims, Grange. "We felt we had a good SIU special investigations unit and a good claims department, but we didn't feel the processes were working as effectively as they could."

The referral rate of suspect claims to the SIU was somewhat low compared to industry standards, according to Russell, and it was evident that communication among departments could be improved. "We decided we needed to reengineer the whole process," according to Russell. "We needed to look at all the technology tools possible to aid in our efforts. You can't fight fraud effectively without technology," he comments.

ASP Attractions

One part of the search was to see what technologies might help Grange red-flag potentially fraudulent claims up-front through NICB (National Insurance Crime Bureau, Palos Hills, IL) fraud indicators, Russell says. The other piece of the puzzle was evaluating products for data mining, data visualization and link analysis. "We looked at a couple of products that were focused on attacking fraud rings and suspicious trends," Russell says. Grange looked at a demo of an InfoGlide, Inc. (Austin, TX), product and NetMap Analytics' (formerly Alta Analytics Westerville, OH) NetMap for Claims, which is available as an installable application or as an ASP option.

"The ASP offering was one of the decision drivers," says Russell. "We have a lot of IT initiatives going on and to take this project on separately would have put an extra strain on our IT staff."

Grange was able to get its databases built with Alta Analytics in fewer than 90 days, Russell recounts. "That was pretty quick, we thought," he comments. "During that whole process, Alta worked with us hand-in-hand to customize the use of NetMap for our processes."

Once the database was up-and-running in December 2000, a NetMap Analytics representative was sent on site to train Grange's claims professionals and test the application, Russell says. As part of the testing, "We were attacking our own data and learning how to use this very complex tool," he adds. "Within weeks we identified several fraud rings."

NetMap for Claims works by examining huge quantities of data in the aggregate and visually displaying links among previously hidden connections. For example, a shared phone number to parties in otherwise unrelated automobile accidents would serve as a red flag to fraud investigators, Russell says. Upon notification of such a link, he adds, "Grange is able to pull in files from ISO's Jersey City, NJ Claim Search, the largest industry database of claims, and then, by combining our data with theirs, we can tap into relevant data that will show us additional links."

Early Notice

Based on NetMap for Claims' performance, Grange subsequently decided to look at NetMap Analytics' NetDetect product for up-front red-flagging with NICB indicators; the insurer plans to conduct a pilot later this year, also on an ASP basis.

While Grange's fraud detection capability has been enhanced by both reforming procedures and by implementing NetMap for claims, Russell says of the latter, "We define success as having found several rings that have attacked or are attacking our policyholders' surplus. That's what will keep our premiums competitive for our policyholders."

-----------------------------------------

Case Study Closeup

COMPANY
Grange Insurance Co., Columbus, OH ($956 million in assets).

LINES OF BUSINESS
Personal and commercial lines P&C.

VENDOR/TECHNOLOGY
NetMap Analytics' NetMap for Claims ASP option; NICB (Palos Hills, IL); ISO (Jersey City, NJ).

THE CHALLENGE
Improve detection of patterns in organized fraud activity.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio