We often get asked how we deal with fraud. It’s a great question. In the P&C industry, fraud accounts for as much as 5% to 10% of all claims expenses. We consider it our responsibility to do everything we can to prevent and reduce fraud, for the benefit of our customers, our insuring partners and our shareholders.
By preventing fraud, we can provide better service to the vast majority of our customers who are honest. We can also create a more transparent, efficient insurance product that is more responsive to our customers’ needs.
Some of our fraud prevention techniques are summarized below. We do much more than this, but we don’t want to reveal our secrets!
The first step to reducing fraud is verifying the details of the applicant. We do this by checking applicants against insurance fraud databases, sanctions lists and OFAC.
Secondly, we require that all of our customers are registered with an on-demand platform such as Airbnb or Lyft. This enables us to confirm that the on-demand worker has been vetted, check their rating, and ensure that they are an existing user of the platform.
The address of the homeshare host’s home, or the registration tag of the rideshare driver’s vehicle, are verified through inspection services and state DMV’s. Fundamental to preventing fraud is to ensure that the objects we are insuring actually exist.
Prevention-in-the-process uses over a dozen techniques throughout our customer’s journey to mitigate the potential for fraud. A few of the actions we take include:
- To prevent both fraud and adverse selection, we require that our customers carry annual homeowners or automobile insurance to cover claims that occur during the periods they are not providing on-demand services.
- For every claim submitted, there will have been a guest in the house or a rider in the car at the time of the loss. We require the ID of the on-demand worker’s customer as part of the claims process. We may contact that customer to verify the occurrence leading to the claim.
- All premiums are collected through electronic payment systems operated by third parties. In addition to protecting the personal financial data and ID of the policyholder, the payment systems employ “know-your-customer” verifications which further reduce the potential for fraud.
Carefully investigating and adjusting claims is critical to preventing fraud. Our adjusters are professional, licensed and experienced. They follow many proven techniques to detect fraud and weed out invalid claims:
- For smaller claims, we may indemnify the policyholder via pre-paid credit cards valid only at retailers that sell the type of property that was damaged.
- When claims are submitted for incidents such as water damage to a home or collision damage to a car, we will physically inspect the property to view the damage. This process firstly confirms the property is owned by the insured and has been damaged by a covered peril. More importantly, it enables us to confirm that the damage occurred during our policy period.
- We interview the claimant and take statements to record all the details of the loss. The policyholder must attest to a Proof of Loss as part of the adjustment process.
Slice has been working with Max H. Bazerman, who is Jesse Isidor Straus Professor of Business Administration at the Harvard Business School, the Co-Director of the Center for Public Leadership at the Harvard Kennedy School, and the Co-Chair of Harvard’s Behavioral Insights Group. Together, we are developing a claims process that is fast and fair. We have used contemporary research in psychology and artificial intelligence to develop strategies to identify honest claims that can be paid rapidly.
Our commitment to a robust program of fraud prevention allows us to preserve the integrity of our policy, the longevity of our products, encourage fairness, and most importantly, to deliver the best value to our customers.