By: Clea Zolotow
Predictive systems can be very helpful in many situations, including detecting errors and automating steps of repetitive tasks. Deploying predictive systems in complex environments, however, has proven exceedingly difficult. One recent patent, developed by my fellow engineers and I, addresses this problem. “Cognitive Systematic Review (CSR) for Smarter Cognitive Solutions” teaches techniques to determine the accuracy of certain events in even the most complex situations–such as risk mitigation and fraud.
What insurance fraud in complex environments may look like
Take insurance fraud, for example. Insurance fraud affects both insurers and their customers. In 2022 alone insurance fraud is estimated to have cost US insurers $308 billion.1
Let’s say I have a friend, who has a house on an island off the southeast coast of the US.
This island experiences seasonal, hurricane-force storms that can cause property damage. My friend’s house, however, is inland enough to be out of the flood zone–and was constructed more recently, under new building codes, providing a sturdier defense against extreme weather.
Despite the relative insulation, my friend’s property insurance premium recently spiked due to an increase in destructive weather events over the past few years. Rising premiums are, of course, sometimes inevitable. But what frustrated my friend was that her premium increased just as much as premiums for homes much nearer the ocean, as well as homes that aren’t up to the new building code.
Now: What my friend doesn’t know is that some number of her neighbors–also inland, also with recently constructed houses–have been making fraudulent claims (as detected by the insurance companies after significant manual review and investigation), hiking up the premiums for all houses in their vicinity.
How technology can help detect deceptive actions
Identifying deceptive actions can be a highly manual and time-consuming process, which can also be easily biased. Many professionals within the insurance industry don’t have the time, access, or resources to gather and process all the information available about a particular event, area, or claim. Or, specifically when it comes to property insurance, tend to group homes together by county, regardless of microclimates or variations in terrain. This translates to less rigorous and accurate predictive models, and ultimately an increased likelihood that red flags slip, unnoticed, beneath the surface.