Insurance Fraud Detection Market Size, Share & Trends Report

Insurance Fraud Detection Market Size, Share & Trends Analysis Report By Component, By Solutions, By Services (Professional Services, Managed Services), By Deployment, By Organization, By Region, And Segment Forecasts, 2019 - 2025

  • Published Date: Nov, 2019
  • Base Year for Estimate: 2018
  • Report ID: GVR-3-68038-916-6
  • Format: Electronic (PDF)
  • Historical Data: 2015 - 2017
  • Number of Pages: 120

Industry Insights

The global insurance fraud detection market size was valued at USD 4.1 billion in 2018 and is expected to register a CAGR of 13.7% from 2019 to 2025. Organizations are continuously engaged in the transformation of business process with the adoption of technologies such as big data, Internet of Things (IoT), Artificial Intelligence (AI), and machine learning to strengthen digital readiness. However, technological advancement has also paved the way for criminals to attempt cyber-attacks and frauds for personal gains and benefits. In a growing threat ecosystem, fraudulent activities such as conspiracy, theft, money laundering, embezzlement, and extortion are becoming key challenges to an organization. Over the past few years, insurance frauds have become prominent cases across the globe, thereby resulting in losses of billions of dollars for insurance providers. Thus, insurers are taking a proactive stance to mitigate and reduce losses due to frauds with the adoption of advanced automation and analytics solutions.

Business operating with traditional and rule-based fraud detection systems cannot potentially address the challenges that are used by criminals to bypass traditional security. Thus, sophisticated frauds require advanced solutions. Instead of relying on obsolete detection methods, businesses are expected to consider new solutions that could improve their fraud detection capabilities. In particular, fraud detection analytics, machine learning, and model-based tools have the potential to prevent such events. As the cases of fraud continue to rise, the adoption of these advanced tools is also expected to provide a competitive advantage in fraud detection ecosystem.

U.S. insurance fraud detection market

Digital readiness offers new strategic capabilities for an organization. However, the move towards digitization is expected to introduce threat vectors for an organization that lacks the ability to tackle the challenges of an omnichannel environment. As insurance companies are migrating toward digital channels to offer new products, create enhanced consumer relationships and expand their share of customers’ financial portfolios, the adoption of advanced threat solutions is expected to become one of the top priorities. A perpetrator may exploit deficiencies in control systems with sophisticated attacks. With the detection of an attack, controls, and access can be tightened, thereby making it difficult for a potential fraudster to act. Thus, fraud detection helps an organization to achieve improved internal systems and controls. Moreover, it is essential to raise awareness of fraudulent activities through a formal training and education program as a part of an overall risk management strategy. A robust training can be given to those managers and staff operating in high-risk areas such as claims processing and underwriting, to ensure that they understand or detect instances of fraud.

Several insurers that have witnessed frauds within their organization are still trying to recover their losses. Once a fraud has already occurred in an organization, the probability of recovering the funds from the offenders is moderately low. As such, it is preferable to try to prevent losses by addressing them in their primary phase. Thus, fraud prevention activities can potentially help to ensure the stability and continued existence of the business. Despite, enterprises are often confused for putting their resources that are committed to detection and prevention of fraudulent activities.

As fraud prevention system may not stop all the potential fraudster, enterprises are expected to adopt solutions that highlight the occurrence of fraudulent activities in a real-time manner. And this can be achieved through advanced fraud detection systems. A fraud detection strategy adopted by an enterprise may help the user to understand anomalies through a reporting mechanism. The key features of a fraud detection solution such as data mining, ongoing risk assessment, trend analysis, and reporting could help an organization to achieve real-time communication of several suspected fraudulent exploits.

Component Insights

The solution segment dominated the insurance fraud detection market in 2018 and accounted for more than 65% of the market share. The adoption of fraud detection software potentially helped to understand the method to defraud an insurance process, reduce false claims, and respond to suspected fraudulent activities quickly is driving the growth of the segment. The use of advanced solutions has the ability to identify suspicious activities, detect subtle patterns, and uncover hidden relationships at every stage of the claims process. Moreover, fraud detection vendors are using advanced technologies such as AI, machine learning, anomaly detection, and automated business rules to handle millions of claims record in real-time or in batch. As a result, it helps an organization to get a comprehensive view of the fraud risk.

The services segment is anticipated to register the highest CAGR of 14.7% over the forecast period. Insurance organizations are expected to explore advanced methods to tackle new challenges in the growing fraud ecosystem. This can be attributed to the perpetrators that find various ways to falsify information for premiums’ reduction, open insurance policies for fictitious beneficiaries, and skim premiums. Thus, the companies are taking advice from the vendors to understand the sophisticated technologies coupled with dedicated expertise that would help them to manage and optimize frauds detection capabilities.

Solutions Insights

The market can categorized based on solutions into fraud analytics, authentication, and governance, risk and compliance. The authentication solution segment accounted for the largest market size of USD 1.2 billion in 2018. Manual handling of insurance frauds cases are rapidly becoming obsolete methods across various insurance companies. The advancement of technology, such as data analytics for fraud detection, has become one of the prime factors of importance for organizations to address the threats and challenges in the growing fraud ecosystem. Effective fraud detection capabilities can be built by combining data from various sources. Analytics has also played a pivotal role in integrating internal data with third-party data to improve fraud detection capabilities. The adoption of analytics has strengthened fraud detection through the use of techniques such as predictive modeling. As a result, it has helped the organization to analyze various fraud incidents, filter potential cases, and identify low-incidence fraud cases for further comprehensive analysis.

In the fierce market competition across the industry, there is a proliferation of digital functionality such as online offerings and self-services to create an optimal consumer experience. However, this digital experience has opened the gamut of threat vectors such as identity theft of customers, thereby increasing the fraud risk for various organizations. In addition to numerous fraud detection solutions, authentication of consumers has become one of the top priorities for organizations and need of the hour. Insurance companies are adopting authentication solutions to strengthen secure communication between consumers and businesses. Thus, authentication is expected to provide an additional layer to verify payments, account changes, send authentication texts, and disclosure or consent of the customer regarding policies.

Services Insights

The professional services include consulting, support and maintenance, and training services, which are designed for consumers to understand and mitigate fraud risk. The fraud solution vendors offer consultant that has deep expertise in the various types of frauds. As a result, these consultants provide comprehensive insights on the potential gaps in the existing infrastructure and information on a solution that could help to deter upcoming fraudulent activities. The consultants also help an organization to identify perpetrators committing fraudulent acts that are operating internally or externally. Similarly, support and maintenance services help the user with the necessary software updates and addressing the challenges of troubleshooting. It allows the company to stay abreast of the fraudulent attacks that may potentially hamper business growth.

The managed services segment is anticipated to witness the highest CAGR over the forecast period. The vendors are continually involved in developing a center of excellence or innovation centers to help various insurers in optimizing their fraud detection processes. These centers empower the insurers and provide access to the expertise, skills, techniques and tools, and advanced technologies to improve fraud detection capabilities. The vendors also conduct pilot projects by assessing the existing fraud capabilities of the organization to ensure that the final implantation eliminates the hidden gaps. As a result, managed services help to enhance fraud detection process, thereby minimizing the losses of a company.

Deployment Insights

The on-premise deployment segment dominated the market in 2018. The on-premise fraud detection solutions help the enterprise to uncover and flag potential fraudulent activities in real-time. The vendors are offering a predictive behavioral scoring model or rule-based system or both to identify threat patterns. However, despite automated systems, the organization still need manual intervention to analyze specific reports. Thus, enterprises primarily rely on on-premise solutions compared to cloud-based services.

The cloud deployment segment is expected to exhibit the highest CAGR from 2019 to 2025. As insurance companies are moving towards the digital transformation of their organization, many organizations are expected to adopt software-as-a-service based fraud detection model. The data stored by these companies on the cloud happens to provide flexibility and scalability for optimize operation. Thus, detection solutions that are cost-effective, easy to deploy, and support maintenance would pave the segment growth in the near future. Moreover, the maturity of the cloud technology coupled with enhanced security features are anticipated to strengthen the segment growth over the forecast period.

Organization Insights

The large enterprise segment is anticipated to dominate the market over the forecast period. The prominent insurance providers globally spend millions of dollars on advertising to influence customer perceptions. This helps the insurer to reach out to the maximum customer as well as build more consumer base by enticing them through discounts in the market. As most of the customers are registered with large enterprises, they have large claims process to handle every day. It is often witnessed that most of the claimant exaggerate to obtain various benefit or advantage they are not entitled to, or when an insurer knowingly denies the claims. In such a case, a claimant may take multiple illegal methods to ensure that request claim is reimbursed. Thus, growing fraud cases such as stolen cars, car damage, unnecessary medium procedure, and fraudulent health insurance billing have created a need for insurers to adopt advanced solutions to address such fraudulent activities.

Global insurance fraud detection market

The SMB segment is expected to witness the highest CAGR of 14.9% over the forecast period. The medium-sized insurance company usually offers basic policies and a broad range of additional coverages that a small business owner may need. These companies typically offer moderate insured value to their customer. A smaller insurance company is often more ideal if a user desire specialty or localized insurance. Moreover, clients with poor credit and a history of claims may potentially get approval from a small organization. The risk of fraudulent activities in such an organization is high as they often lack the necessary tools to unearth sophisticated fraudulent claims. Thus, growing cases across such organization would lead them to take an active approach in reducing the false claims.

Regional Insights

North America region held the dominant revenue share of more than 49% in 2018. The presence of key player such as ACI Worldwide, Inc.; BAE Systems; and Fiserv, Inc.; among others has strengthened the regional growth. Insurance sector in U.S. is primarily categorized as property, casualty, and life annuities. The U.S. government has mandated the citizens to adopt health and life insurance. Thus, creating a huge market for the insurance sector. As a result, it has potentially opened the opportunity to exploit vulnerabilities for fraudulent activities such as claims processing. As per a research conducted by the Federal Bureau of Investigation (FBI), the total estimated cost of insurance fraud in the U.S. is expected to be more than USD 40 billion per year, which is expected to create growth opportunities for the market.

The Asia Pacific regional market is anticipated to register the highest CAGR of 17.0% over the forecast period. The companies in the region are taking a proactive measure with the adoption of advanced technologies to reduce the instance of insurance fraud. Furthermore, higher spending for improved claims management strategies and claims handling to ensure customer satisfaction and retention is anticipated to propel regional growth. Moreover, the rising awareness of fraud detection strategies is expected to boost the demand for fraud detection solutions.

Insurance Fraud Detection Market Share Insights

The market is vastly fragmented owing to the presence of individual and comprehensive fraud detection solutions providers operating globally. The industry is also characterized by highly competitive rivalry owing to the proliferation of small and medium players offering customized solutions. Moreover, fraud detection-as-a-service providers are expected to increase the market competitiveness owing to the comprehensive and cost-effective product offerings. As the growing cases of the fraudulent activities challenge the insurance industry, fraud detection vendors are expected to seize the opportunity on the evolving threat ecosystem. The vendors are anticipated to offers advanced solutions that serve the specific challenges, thereby enabling an insurer with robust fraud detection procedure.

Key players are allocating investments and significant resources for continuous development of advanced solutions to maintain their market position. The increasingly complex cyber threat coupled with risk management environment in insurance companies has led to the implementation of fraud detection solutions globally. Key industry players include Accenture; ACI Worldwide, Inc.; SAS Institute Inc.; IBM Corporation; Fiserv, Inc.; SAP SE; Experian Plc; and BAE Systems.

Report Scope

Attribute

Details

Base year for estimation

2018

Actual Estimates/Historical data

2015 - 2017

Forecast period

2019 - 2025

Representation

Revenue in USD Million and CAGR from 2019 to 2025

Regional scope

North America, Europe, Asia Pacific, Latin America, and MEA

Country scope

U.S., Canada, U.K., Germany, China, India, Japan, Brazil, and Mexico

Report coverage

Revenue forecast, company ranking, competitive landscape, growth factors, and trends

15% free customization scope (equivalent to 5 analyst working days)

If you need specific information that is not currently within the scope of the report, we will provide it to you as a part of the customization


Segments Covered in the Report

This report forecasts revenue growth at the global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2015 to 2025. For the purpose of this study, Grand View Research has segmented the global insurance fraud detection market report on the basis of component, solutions, services, deployment, organization, and region:

  • Component Outlook (Revenue, USD Million, 2015 - 2025)

    • Solutions

    • Services

  • Solutions Outlook (Revenue, USD Million, 2015 - 2025)

    • Fraud Analytics

    • Authentication

    • Governance, Risk, and Compliance (GRC)

  • Services Outlook (Revenue, USD Million, 2015 - 2025)

    • Professional Services

    • Managed Services

  • Deployment Outlook (Revenue, USD Million, 2015 - 2025)

    • Cloud

    • On-Premise

  • Organization Outlook (Revenue, USD Million, 2015 - 2025)

    • Small & Medium Business (SMB)

    • Large Enterprise

  • Regional Outlook (Revenue, USD Million, 2015 - 2025)

    • North America

      • U.S.

      • Canada

    • Europe

      • U.K.

      • Germany

    • Asia Pacific

      • China

      • India

      • Japan

    • Latin America

      • Brazil

      • Mexico

    • MEA

Key questions answered by the report
Request for Customization

Pricing & Purchase Options

Buy Chapters or Sections

Avail customized purchase options to meet your exact research needs:

  • Buy sections of this report
  • Buy country level reports
  • Request for historical data
  • Request discounts available for Start-Ups & Universities

Why Choose Us

  • Research support

    24/5 Research support

    Get your queries resolved from an industry expert.

  • Custom research service

    Custom research service

    Design an exclusive study to serve your research needs.

  • Quality assurance

    Quality assurance

    A testimonial for service in the form of BBB "A" Accreditation.

  • BBB Rating dandb
  • Information security

    Information security

    Your personal and confidential information is safe and secure.

  • grand view research PCI DSS complaint grand view research paypal verified