Managing Fraudulent Payment Risk in the International Private Medical Insurance Market

Digital payment platforms often incorporate robust security measures, including fraud detection algorithms and compliance with industry standards, to minimize the risk of fraudulent transactions. This helps protect both the insurer and the insured from financial losses.

In this iPMI Global in Focus Payments Article, we examine how international health insurance providers can manage fraudulent payments risk, and which areas they should be focusing on.

• Implementing robust fraud detection and prevention measures: The importance of having strong processes to identify and mitigate potential fraud. Insurers should implement a multi-layered approach that includes:

• • Know Your Customer (KYC) procedures: KYC involves verifying the identity of customers to ensure they are who they claim to be. This can help to prevent identity theft and other types of fraud.
  • Anti-Money Laundering (AML) policies: AML policies are designed to prevent, detect, and report money laundering activities. Insurance companies are vulnerable to money laundering schemes because they often process large transactions.
  • Suspicious activity reports (SARs): Insurers should have clear procedures for filing suspicious activity reports when they detect unusual or potentially fraudulent transactions. These reports are sent to financial intelligence units, which can investigate and take action to prevent financial crimes.
  • Partnering with payment providers that use artificial intelligence (AI) and machine-learning (ML): Advanced technology can be leveraged to analyse large volumes of transactional data to identify patterns and anomalies that may indicate fraud. AI and ML algorithms can be trained to recognize fraudulent activity and flag suspicious payments in real time.

• Addressing fraud in both premium payments and claims: Fraudulent activity can occur at different stages of the insurance process:
  • Premium payments: Fraudulent activity related to premium payments could involve individuals or groups attempting to purchase policies with the intention of making fraudulent claims or obtaining refunds after commissions have been paid. Additionally, criminals might engage in “sanction busting,” which involves disguising transactions to evade sanctions.
  • Claims management: Fraudulent claims are a significant concern for insurers. This could involve:
    • Policyholders misrepresenting information or fabricating incidents to receive payouts.
    • Healthcare providers submitting false or inflated bills.
    • Organized crime rings creating elaborate schemes to defraud insurers.

Insurers need to carefully verify the validity of claims, the legitimacy of healthcare providers, and official documentation related to medical incidents.

• Recognizing the importance of human oversight and customer service: While the sources underscore the role of technology in fraud prevention, they also highlight the importance of the human element:
• Responsive customer service: Providing excellent customer service is crucial for addressing potential fraud quickly and effectively. When customers report lost payments or suspicious activity, insurers need to respond promptly and work to resolve the issue in a timely manner.
• Experienced service teams: Having knowledgeable and experienced service teams who can investigate potential fraud and handle escalations is essential. These teams need the training and resources to identify red flags and follow established procedures for addressing suspected fraud.

Conclusion

This article focuses on the technological aspects of fraud prevention and payment processing. iPMI Providers should also train and support their service teams in identifying and preventing fraud.