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1. Solution Brief
IBM Systems and Technology Group
IBM Smarter Analytics
Solution for insurance
Detecting and preventing insurance claims fraud,
waste and abuse
Estimates put the cost of fraud to US insurers at tens of billions of
dollars annually. Similar figures can be found for insurers worldwide.
With fraudulent claims estimated to represent a significant number of
all claims paid each year, prevention and recovery of fraudulent costs is
a key goal for insurers. Today, methods of fraud, such as billing for
more extensive services than those required or staging of accidents,
have become more sophisticated. Organizations are under pressure to
pay claims quickly and overburdened fraud investigators simply can’t
keep up.
Fraud not only results in revenue losses for insurers, it also leads to
higher premiums for consumers. Insurers need a new approach to fraud
detection and prevention that can help uncover new fraudulent
schemes, recognize patterns of non-compliant behavior and identify
businesses or consumers that are likely to commit fraud in the future.
The IBM® Smarter Analytics Solution for insurance on IBM
zEnterprise® uses sophisticated predictive analytics to identify
potentially fraudulent claims before payment and reduce the number of
false claims paid.
The Smarter Analytics Solution helps address fraud-related challenges
and can dramatically reduce costs from fraud and abuse. It helps
organizations detect suspicious transactions before payment, minimize
loss from overpayments, and recommend methods of intervention.
Highlights:
• Detect suspicious transactions
• Analyze historical and real-time data
• Integrate fraud detection with case
management
• Benefit from IBM software and IBM
System z, optimized for insurance fraud
workloads

2. Solution Brief
IBM Systems and Technology Group
2
Unlike point solutions that address only a single step in the
process or provide a simple “score,” the Smarter Analytics
Solution integrates multiple capabilities to help combat fraud
across the entire claims life cycle. It combines several
analytical technologies and tools that help organizations:
• Prevent fraud at the time of policy submission.
• Predict fraud at the intake of claims.
• Identify fraud during adjudication.
• Discover fraud by examining patterns in data.
• Investigate fraud more efficiently by reducing false positives
and accelerating the investigation process.
• Visualize trends and hotspots to continuously improve
antifraud efforts.
The Smarter Analytics Solution efficiently enhances the
claims adjudication process without incurring business or
performance penalties. The adaptive systems from IBM learn
from the latest data, which helps to protect against emerging
fraud. The solution embeds advanced algorithms directly into
business processes, which gives insurers the ability to detect
fraud in real time before funds are paid out.
Using sophisticated analytics, the solution recommends the
most effective remedy for each case, which helps to optimize
an organization’s finite resources. For example, the system
might recommend that a simple letter requesting payment be
sent to resolve one case, while recommending that a full
investigation be opened in another case.
Detect suspicious transactions
To detect fraud, you need to determine what constitutes
“normal” behavior versus those behaviors that are “different”
or “bad.” Identifying how these “outliers” behave relative to
other businesses or consumers can help you identify
fraudulent activities. If you can detect fraud before paying out
funds, you can reduce recovery expenses for fraudulent claims.
Facing heavy caseloads and policyholder expectations for fast
claims processing, many adjusters are able to spot fraud only
in obvious cases. By examining public and internal data in the
background, the Smarter Analytics Solution can help provide
real-time alerts to adjusters when it detects questionable
behavior, communications or relationships. The Smarter
Analytics Solution uses a wide array of tools to:
• Validate the identities of all parties involved.
• Analyze relationships among parties, including parties
involved in other claims.
• Scrutinize structured and unstructured data associated with
the event.
• Monitor social media to identify inconsistencies compared
with claim details reported to the carrier.
• Analyze historical and real-time data.
Business analytics are designed to identify patterns in data. At
an insurance organization, after you have detected fraudulent
schemes, patterns of non-compliant behavior or even criminal
activity, the next step is to use predictive analytics to identify
others that are behaving in a similar fashion. Advanced
analytics capabilities built into the Smarter Analytics Solution
help you evaluate and analyze real-time as well as historical
data. When you discover groups of businesses or consumers
that are behaving the same way, and are likely to behave badly
in the future, you can isolate the indicators that show whether
or not a business’ or consumer’s behavior is getting worse over
time.
The Smarter Analytics Solution embeds advanced algorithms
directly into business processes, which gives insurers the
ability to detect fraud in real time and before funds are paid.
The solution actually “learns” from the latest data, which
helps protect your organization from new approaches to
fraud.
Once claims are confirmed as fraudulent, it is possible to
examine all data associated with these claims to discover
common patterns in content and relationships. By leveraging
the IBM Loss Analysis and Warning System (LAWS) and
IBM SPSS® predictive analytics software, insurance
companies can discover these patterns and apply them to the
entire population of claims, increasing the potential to
discover fraudulent claims.

3. Solution Brief
IBM Systems and Technology Group
3
Integrate fraud detection with case
management
Many insurers use the zEnterprise system to support their
claims processing and adjudication. When your operational
data and/or data warehouses are housed on IBM System z® in
close proximity to each other, you can take advantage of
workload-optimized fraud detection capabilities on
zEnterprise. Running analytics in close proximity to related
data avoids data proliferation across multiple systems and can
enable faster response times with fewer compute resources
and reduce potential security exposures and outages. In
addition, the data used for real-time analysis is more accurate,
resulting in fewer “false positives.” In some cases, compliance
issues can arise if claim payments are stopped without
sufficient reason. Reducing false positives will significantly
improve confidence in claims that are stopped for further
investigation of potential fraud.
This tight integration with transactional systems (where
claims data and processes typically reside) can also produce
performance benefits, better resource management and
workload assessment. By integrating fraud detection with case
management, you can more effectively prioritize claims based
on value, the likelihood of appeal and other factors. You have
the flexibility to move from post-payment analysis to pre-
payment fraud detection without affecting efficiency and
performance targets for claims adjudication rates.
Additionally, when you deploy the Smarter Analytics Solution
on zEnterprise, you can incrementally enhance claims
processes with predictive analytics building blocks,
eliminating the need to extract, transform and load the data
into yet another IT environment.
Benefit from IBM software and System z,
optimized for insurance fraud workloads
The Smarter Analytics Solution is well integrated across all
layers, embedding the industry-proven fraud detection models
and capabilities of the IBM Fraud and Abuse Management
System (FAMS). In addition, it brings the unique
characteristics of healthcare fraud workloads together with
IBM software and System z software for optimal performance.
SPSS predictive analytics software and System z servers
deliver a highly optimized analytics environment that can take
advantage of new IBM DB2® on IBM z/OS® and SPSS
Modeler functionality in close proximity to data that resides
on System z.
z/OS DB2 technologies for scoring and temporal data
combined with SPSS scoring capabilities are a powerful
combination. Models can be scored and updated in real time
at the time of the transaction, allowing data from current
transactions to be factored into the analysis along with
historical data.
Combining SPSS predictive analytics capabilities with System
z means a higher percentage of fraudulent claims can be
detected before payment without negatively impacting claims
processing efficiency, which further reduces recovery costs.
SPSS scoring algorithms perform mathematical calculations
that require an advanced floating-point architecture. The
zEnterprise system is designed to optimize this type of
analytic computation with improved hardware, compilers and
one of the industry’s fastest processors.
The zEnterprise system supports clustering technologies that
allow multiple servers to work together to provide 24-hour a
day operations for years. Clustered servers can be miles apart,
eliminating the possibility that your fraud and abuse solution
will be unavailable because of local site problems, electrical
disruptions or system maintenance. The Smarter Analytics
Solution is capable of dynamically moving applications across
clustered systems to ensure accessibility to the underlying
data, so your staff remains productive without experiencing
unplanned outages.

4. Solution Brief
IBM Systems and Technology Group
4 ZSS03071-USEN-00
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© Copyright IBM Corporation 2012
IBM Corporation
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Produced in the United States of America
August 2012
IBM, the IBM logo, ibm.com, System z, z/OS, zEnterprise, DB2, and
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and conditions of the agreements under which they are provided.
The System z environment is a world-class database and
hardware platform that is optimized to deliver performance,
flexibility and scalability for the most complex analytics
applications. It can dynamically add capacity without major
technology replacements or migrations. You can purchase
additional capacity for deployment, without sacrificing data
availability. A centralized environment can help eliminate
unused capacity that is costly to purchase and difficult to
manage.
When you centralize your information infrastructure onto a
single zEnterprise or cluster of System z servers, you can
maximize your return on investment and ensure a cost-
efficient infrastructure. With the robust, easy to scale and
manage infrastructure, your fraud and abuse solution can
remain accessible without compromising staff productivity.
Together, the zEnterprise platform and SPSS predictive
software make it possible for data from current transactions to
be factored into analysis in real-time.
Why IBM?
IBM has worked with insurers for decades to develop and
evolve an optimal approach to fraud detection. The Smarter
Analytics Solution builds on this proven experience and
technology and is backed by a comprehensive array of data
management and business analytics tools from IBM that take
the guesswork out of making claims-related decisions. IBM
offers a unique combination of business analytics products,
solutions, services and experience that can help you develop a
roadmap to create business value with analytics.
The zEnterprise platform including the hardware, z/OS
environment, DB2 database and SPSS predictive software
makes it possible for data from current transactions to be
factored into analysis in real-time. The system can detect a
higher percentage of fraudulent claims before payment
without negatively affecting your claims processing efficiency,
which reduces your recovery costs.
For more information
To learn more about the Smarter Analytics Solution for
insurance, please contact your IBM representative or IBM
Business Partner, or visit: ibm.com/analytics/us/en/solutions/