Jan 10 2013
IT fraud detection is being used more and more today as Loss Prevention departments employ its in-depth analytics capabilities to help uncover abuse. Several organizations, including many in the insurance industry, the National Retail Federation, and even the federal government, are looking to IT fraud detection methods to weave together the complex patterns typical of fraud cases in their industries. These and other public-facing businesses are finding that the more time and effort they invest in IT fraud detection analytics and predictive methods, the greater their success in uncovering and thwarting fraud.
One program that is achieving success using IT fraud detection programming is Medicare. The federal health care program, which reportedly loses $60 billion annually to fraud, implemented IT fraud detection analytics in 2011 in an effort to clamp down on false claims. In the short time it has been in use, the system has already uncovered and stopped $115 million worth of improper claims from being paid, and many more claims are still under investigation. The real power behind the system is its ability to inspect and analyze claims collectively instead of individually (which has been the practice in the past), piecing together similarities and anomalies that highlight potential fraud.
Other types of insurers are taking note of the successes in the Medicare program and beginning to investigate similar methods of IT fraud detection in their businesses. The challenge is much greater for the bulk of the industry because of the diversity of claims, insurers, and reporting methods, but the capability to look for commonalities despite that diversity is well within the realm of IT fraud detection analytics. Currently, a comprehensive system of database searches, predictive analytics, network link analysis, and text mining is the prevailing model for the industry; however, insurers and system designers are also looking at methods to include social network analysis in their IT fraud detection programs.
Retailers are also working diligently to develop IT fraud detection systems. Return fraud is one of the biggest areas of concern for Loss Prevention departments, which claim that nearly 4 percent of all returns made to retail establishments are fraudulent, accounting for almost $9 billion in lost revenue annually. This fraud comes in many forms, but the one affecting the industry most today is that of e-receipt fraud, where a customer returns an item (usually stolen) to a brick-and-mortar retailer using a counterfeit online electronic receipt. Presently, there is no effective way to crack down on this abuse, but IT fraud detection programs are a prime consideration. Such a solution is vital to this industry, which must walk a fine line between disgruntled customers and lost profits.
Unlike the credit card industry, which has been using IT fraud detection methodology for years, predicting and stopping fraud in the insurance, health care, and retail worlds has been much more difficult because of the human component. Advancements in the ability of IT to decipher and analyze large databases of information is changing that, however. As Loss Prevention groups look for new ways to combat fraud in their industries, IT fraud detection methods will play a large part in their success.
ADCom Solutions has the ability to deliver solutions that bring value to its clients’ business needs. Increased speed, flexibility, and customization enable our team of telecom professionals to meet changing needs and provide leading technology solutions to deliver a competitive advantage in the marketplace. Learn more at www.ADComSolutions.com and be sure to follow us on LinkedIn and Twitter.