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Fraud prevention in Chinese insurance

Ever since the mid-18th century, we have had insurance. Starting out with life insurance, and then moving on to other forms, an industry was started that allowed people to have some sort of peace of mind that they would be financially protected from the potential pitfalls that life seems to throw into our path every so often.

Of course, ever since that time, we have also had insurance fraud, as people attempt to game the insurance system in order to get big paydays at the expense of all the other people that they had supposedly pooled their money with in good faith via insurance companies. Over the centuries, such fraud has been responsible for the loss of billions upon billions of dollars – tens of billions each year now, in fact.

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With that said, it’s understandable that fraud prevention is a major focus for insurers the world over. Due to the negative effects of fraud that are passed onto customers, it should really be a concern for current and potential policyholders, too. Here, Pacific Prime China delves into the topic of insurance fraud prevention in China, and some of the new technologies that are being used to curb insurance fraud.

Fraud in China

In February of 2018, the Chinese government insurance regulator in Beijing issued some guidance to insurance companies when it comes to tackling the issue of insurance fraud. So what did they have to say? Well, responding to the myriad of fraud issues that face the nation, the regulator has decided that it shall take charge of anti-fraud measures within the insurance sector.

This event was especially poignant as it occurred only one week after the government also took control of China’s largest insurance provider, Anbang Insurance Group, due to the company’s violations of regulations and laws. What this means for the future has yet to be fully understood, but it does point to the fact that the China takes its insurance industry, and the fraud connected to it, very seriously.

This is rightfully so, too. Most Chinese people are familiar with some of the various scams that are run all over the country, such as when individuals throw themselves in front of traffic –whether moving or not – in order to try to cash in on a driver’s motor insurance.

When it comes to penalties for insurance fraud in China, the punishment oftentimes parallels the government’s perception of how much damage was done. The larger the amount that an insurance fraudster ends up taking from an insurer, the larger the punishment may be. Punishments most often involve fines or various amounts, but can also include prison sentences, and in extreme cases involving the certain uses of ill-gotten gains, even life imprisonment or the death penalty.

What’s more, even after the state’s laws have dealt with a criminal who committed insurance fraud, any affected parties can then pursue civil litigation to try to recover damages. In other words, if you commit fraud, you could potentially be in very big trouble.

Traditional methods of battling fraud

Since insurance fraud has been around so long, there must me some tried-and-true methods of battling against it, right? Of course!

For example, if an employee makes ongoing claims on their company-provide group health insurance policy for a chronic injury sustained on the job, an insurer may resort to some good old-fashioned detective work to make sure that the employee is as injured as they claim. This would involve hiring a private detective or other representative to stake out the employee’s home to monitor them.

The detective work doesn’t stop there in 2018, though, as insurers are now scouring people’s social media accounts for signs that fraud may be occurring. Even a person’s pacemaker, smart device, or wearable tech data is not necessarily off limits when it comes to fraud prevention.

In addition to this method, less intrusive methods of fraud detection have become standardized across the global insurance industry over the years. This involves pouring through documentation to look for irregularities that are indicative of some sort of untruth or fraud. Any inconsistencies that might indicate fraud are closely followed up by insurance providers, and can lead to the denial of claims, the dropping of a client, or potential criminal or civil penalties.

Fraud prevention with technology

Never content with resting on their laurels, China’s insurance providers are making sure to stay on the cutting edge of technologies that can aid them in their quest to stamp out insurance fraud outright.

Perhaps chief among these is the computerization of the data analysis that was once formally done exclusively by people. Computer algorithms and predictive modeling can now automatically search data as it is entered into an insurers system, and automatically produce red flags that highlight cases where fraud is most likely. Moving forward, this type of work will likely even be done by artificial intelligence, thereby making errors less likely. 90% of insurance companies today already use automated red flags and business rules to assist in fraud prevention.

An even more recent development in the world of fraud prevention, especially as it applies to China, is the use of facial recognition. The way this 99.7%+ accurate technology works with regards to fraud prevention is by proving cases of identity theft. Major Chinese insurer Ping An Insurance has already invested 50 billion yuan into the technology, and plans to spend 100 billion more over the next ten years. Voice recognition systems are also being developed and used similarly.

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Even all of these new technologies will likely not be able to put an end to insurance fraud. Insurance providers will need to stay ever-vigilant in order to not be taken advantage or, which also ends up saving honest policyholders money in the long run.

Nevertheless, people cannot wait for the end of insurance fraud to receive insurance coverage for the most important aspects of their lives. If you are in the market for a new insurance policy, or you have an existing policy that you would like to upgrade or save money on, contact the helpful insurance advisers at Pacific Prime China today! Our agents can provide you with a free plan comparison and price quote, as well as answer any questions you may have about insurance or healthcare in China, or even insurance fraud.

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