Munich Re extends its partnership with FRISS to support SA Insurers in their fight against insurance fraud

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Munich Re has extended its partnership with FRISS, a market leader in AI-powered fraud and risk solutions, to offer advanced fraud detection solutions to insurance clients throughout Africa. The partnership empowers Munich Re of Africa (MRoA), through its Johannesburg-based Global Consulting Unit, to support South African insurers in their ongoing fight against insurance fraud.

Fraud is a constant problem in global property and casualty insurance markets with estimates that one in 10 claims contain some element of dishonesty. The South African Insurance Crime Bureau (SAICB) estimates that as much as R7 billion is lost to the short-term insurance industry each year due to claims-related fraud. Examples from the short-term insurance sector (dominated locally by personal motor, home and household contents policies) include claiming for pre-existing damage to property, staged motor vehicle accidents, inflated claims or fake burglaries, to name a few. The life insurance sector, meanwhile, is under fire from criminal syndicates who fake deaths or attempt to claim against multiple policies issued against the same life insured. 

The SAICB serves as a mechanism through which the country’s large insurers can work together to address the problem. There is a broad consensus among industry stakeholders that a comprehensive and independent insurance claims database would assist in the fight against organised insurance crime; but concerns over competition and data protection make the implementation of such solutions difficult. In the interim individual insurers, assisted by their reinsurance partners, are turning to technology to stamp out fraud in their businesses. 

Insurtech, defined as the application of technology to squeeze out savings and efficiency from the current insurance industry model, is already assisting insurers in issuing (underwriting) policies in real time and processing claims pay-outs more efficiently. The logical next step is for insurers to apply similar innovations to analyse the volumes of claims and underwriting data available to them. But they need not develop solutions from scratch. FRISS has been developing and implementing technology-based fraud and risk solutions for the insurance industry since 2006.

The firm combines expert business rules with internal and external data sources and state-of-the-art artificial intelligence (AI) to automatically flag risks. It allows insurers to conduct their day-to-day operations with confidence that data anomalies will be spotted whether during policy issue or renewal or at claims stage. FRISS applies AI in its predictive modelling, text mining and anomaly detection processes that run seamlessly in the background. “We are proud that together with Munich Re we can help South African insurers in digitalising their insurance processes – by automating risk assessment in underwriting and claims, insurers can spend more time on servicing their clients and growing their business,” says Martyn Griffiths, sales manager at FRISS. The firm offers its automated risk analysis in 42 countries and has implemented their AI powered solutions over 175 times globally. It is holding discussions with several insurers across Africa.

It is easy to forget the contribution made by the short-term insurance industry to the local economy. Motor, home and household content covers make it possible for ordinary South Africans to go about their daily business safe in the knowledge that their assets are covered against loss due to accidental damage or theft. It is also easy to forget that insurance is based on trust. A policyholder pays a premium and trusts that the insurer will take care of subsequent losses while the insurer trusts each policyholder to make honest representations at both underwriting and claims stage. Abuse of this trust, whether due to organised crime or attempts by individual policyholders to enrich themselves at the insurer’s expense, result in every policyholder paying more. This is among the many motivations for insurers to identify and mitigate fraud. 

“An insurer cannot rely entirely on AI for risk management at the underwriting stage or for fraud detection at claims stage”, says Erika Bothma, senior consultant at MRoA. Best practice is to complement AI solutions with quality data, industry-leading expertise and state-of-the-art network detection. End-to-end solutions are designed and implemented locally in collaboration with FRISS and MRoA’s Johannesburg-based Global Consulting Unit.