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As a special investigative unit (SIU) manager, Liberty Mutual Agency Markets' (LMAM) — a unit of Boston-based Liberty Mutual (total assets of $88.1 billion) — Joe Zuromsky has one of the toughest jobs in claims. Providing speedy resolution of claims is the essence of what insurers do for their policyholders, but as a fraud fighter, Zuromsky's job largely is to identify claims that should not be paid. "We're in business to pay claims, but we also owe it to our policyholders to fight fraud and keep premiums down," he comments.
According to Zuromsky, technology plays a critical role in distinguishing LMAM's ability to fight fraud. In mid-2006, the carrier implemented its Fraud Focus tool, built in partnership with ChoicePoint (Alpharetta, Ga.) using the vendor's anti-fraud technology (formerly known as Magnify). Using predictive modeling, business rules and identity-matching technology, Fraud Focus identifies suspect claims at first notice of loss. "[ChoicePoint] drew five years of the claims history in the SIU and we put together business rules identifying certain indicators of fraud," Zuromsky relates. "Using predictive modeling, we score claims from one to 1,000 in terms of their likelihood for fraud."
The Fraud Focus system has resulted in a 30 percent increase in the referral of suspicious claims while ensuring that the referrals are of far greater quality, Zuromsky says. Success on that score is demonstrated by a 75 percent increase in the SIU's impact ratio — meaning the proportion of claims that are denied, compromised or withdrawn. Zuromsky also reports a large decrease in the severity of claims but declines to cite numbers.
Other benefits include reducing the burden on busy claims adjusters to identify potentially fraudulent claims, Zuromsky notes. However, the value of the system also redounds directly to policyholders with legitimate claims. "We want to pay meritorious claims as fast as we can," he says. "And if those cases aren't coming to the SIU, they are getting adjusted and negotiated more quickly."
In addition to simply reducing the bottom-line impact of fraud on the business, Fraud Focus gives LMAM a strategic advantage, as well, Zuromsky argues. "It identifies suspicious claims more rapidly, it produces a better quality referral to our investigative unit, and it also alerts and trains the claims professionals," he says.
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