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Article bawi 2013 besana_pantarotto_1_0


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BAWI2013, Insurance Antifraud Unit and Business Analysis, Competencies, Techniques, Enterprise Analysis, Business Case, BABOK Guide & Frauds

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Article bawi 2013 besana_pantarotto_1_0

  1. 1. Business Analysis Trend – From BAWI 2013 – Business Analysis Workshop Italy 2013 – 18th October 2013 – IIBA Italy Chapter Article: “Business Analysis in Insurance– Antifraud Unit” Sergio Besana, MBA, Antifraud Unit, Insurance Company Luigi Pantarotto, MBA, CBAP®, B.A. Leader, SAS Institute There is an emerging role in the Insurance Industry: the antifraud ‘Business Analyst’ professional. We will show how the Business Analysis framework described by the BABoK® Guide can help a professional to succeed in this role, which is a strategic role for the whole industry: fraudulent claims for UK alone reached the amount of 2.2 billion € per year. Before that, we introduce and discuss Insurance Frauds and the Antifraud Units. Insurance fraud is a specific case of fraud, devised against the insurer with the intent to fraudulently obtain some benefit or advantage not otherwise entitled. It is a widespread phenomenon in Italy, not often enough sanctioned by social disapproval. The Italian Penal Code has provided the specific crime of insurance fraud (Art 640 C.P.). Over recent years, a new awareness of the dangers connected to fraud has developed. Organized crime rings can also be involved in insurance fraud, sometimes carrying out schemes that are very complex, and reaping substantial gains. Data published by IVASS (Italian Insurance Authority) in 2011 reporting scams officially ascertained and reported by insurance companies operating in Italy cannot be regarded as trusted, because fraud identified, but not contrasted, and perpetrated, but not discovered and verified - are not counted. The 2.04 % percentage only displays the tip of the iceberg. The lines of business most affected by fraudulent phenomena are: Motor Third Party Liability (TPL) and Bodily injury (driver injury, injury to third parties). Also significant is the number of frauds relating to Property and Liability policies, or accident and health policies, which carry a greater impact in economic terms (because compensations put in reserve are higher). Following the changes in Italian law of 2012, every insurance company must have an antifraud unit. A research by CETIF1 2013, shows that the key success factors in counteracting fraud arise from: adequate training of employees, adequate level of sensitivity of the indicators of fraud and alerts adopted, effectiveness of policies and corporate guidelines, along with effectiveness of computer tools available to the claims settlement network / fraud analysis unit. A critical success factor is the detection of fraudulent behavior through analysis of the indicators of fraud, of recurring names and links between the entities involved (damage holders, lawyers, body shops), other companies’ accidents, insurance policies, and the location of events. Hence, the more effective patterns of fraud management are those based on a high level of maturity of both the organizational model and information systems. 1 Centro di Ricerca su Tecnologie, Innovazione e servizi Finanziari, Università Cattolica, Milan Sergio Besana, MBA, Antifraud Unit, Insurance Company Luigi Pantarotto, MBA, CBAP®, B.A. Leader, SAS Institute 1/2
  2. 2. We see now why Business Analysis skills and techniques are so key in this area of business. Preventing and contrasting frauds, in Business Analysis words, is a ‘business need’. The best solution to face this challenge, from what discussed above, is made up of 1. competencies, made available through a dedicated unit of skilled antifraud business analysts (organizational model) and 2. cutting edge antifraud information technologies (information sytems). Let’s focus first on the fraud analyst role. Business Analysis is defined by BABoK® Guide as a ‘Liason’between stakeholders, capable of addressing a business need/opportunity through a business solution. Insurance companies are looking for Business Analysts capable of dealing at the same time with antifraud business rules and business requirements, a variety of stakeholders, and technological solution requirements that needs to be validated and managed. After analyzing a number of anti-fraud professional job enquiry we found a match between the competencies Insurance Companies are looking at and the knowledge areas, techniques and underlying competencies framework described in the BABoK® Guide. Among such competencies are Investigative skills (BA’s Analytical Problem Solving), knowledge of legal/regulatory framework, of fraud risks affecting the industry and of corporate lending policies and processes (Business Knowledge), ability to appropriately challenge stakeholders (Communication Skills but also Elicitation in general) and software applications skills. We found a match also in needed techniques: Benchmarking, Business Rules Analysis, Decision Analysis, Document Analysis, Process Modelling, Risk Analysis, Root Cause Analysis. If we focus then on technology, we realize that antifraud brings complex challenges and new project initiatives needs periodically to be assessed & prioritized based on ROI and finally selected and funded. BABoK® Guide and its Enterprise Analysis knowledge area empowers the antifraud unit with a framework to estimate the Business Case for new or enhanced antifraud solutions. We consider a real case story of a small Motor Third Party Liability Insurance Company which worked with SAS Institute to define a roadmap to improve its systems. The solution is providing the Insurance with new Business Rules, DB Searching and Anomaly Detection, Predictive Analytics and Social Network Analysis capabilities. The Business Case compares initial solution costs and emerging costs of investigation against the value of savings generated by higher suspicious and detection rates. The resulting ROI measures, and this is typical for antifraud technologies, are sound: an NPV in excess of 4 M€, IRR > 200% and a Payback Period < 10 months, even in the most conservative scenario. With such Business Analysis approach the Antifraud Director was able to secure the investment. He filled the existing technological gap of its Antifraud Unit and in this way he provided his company with a competitive advantage against many other insurers. Antifraud Unit and Business Analysis are the winning team: Business Analysis competencies are precious to antifraud both to support its everyday process and to shape Business Cases when the organization needs to move forward towards a more mature antifraud system. As we expect that Antifraud efforts will become more and more relevant in Italy in the next years, we see an opportunity for the IIBA Italy Chapter to promote the culture of Business Analysis among antifraud professionals and their organizations. Sergio Besana, MBA, Antifraud Unit, Insurance Company Luigi Pantarotto, MBA, CBAP®, B.A. Leader, SAS Institute 2/2