Why Are Insurance Carriers Afraid to Share Claim Data - Even when It Helps Their Clients and Fights Fraud?

By Damien Jonathan Caldwell

Our industry is built on data, yet the property and casualty market has a paradoxical relationship when it comes to it.  Especially when it comes to claims data.

As anyone in risk management and claims can attest, every claim tells a story.  Patters emerge, behaviors repeat, networks form and sometimes fraud evolves.  Yet despite this reality, many insurance carriers remain reluctant, some outright resistant, to sharing claim data with the very employers, brokers, and partners who bear the risk and ultimately pay the bill.

The question is no longer whether shared claims data could help to improve outcomes or reduce fraud.  The evidence is overwhelming.  So the real question becomes: Why is this not happening still?

The Scale of the Fraudemic

Insurance fraud is not a niche issue, it is a systemic and escalating financial burden on the U.S. economy as a whole and every stakeholder in the risk chain:

-       Total fraud losses in the U.S> are estimated at over $308 Billion annually, across all lines of insurance (InsuranceFraud.org)

-       Roughly 10% of all insurance payouts are estimated to be fraudulent accoding to CoinLaw, meaning that one in ten claim dollars may be tainted.

-       Property & Casulaty alone costs insurers tens of billions, the current estimates range between $90 and $122 billion annually

-       Workers’ Compensation Fraud is estimated at $34 to $44 billion annually

-       Healthcare, including Medicare and Medicaid are estimated to exceed $105 billion per year

According to USI Insurance Services, left unchecked fraud can add over $900 a year to an individual policy holders’ premium.

These figures are not abstract.  They represent very real dollars which directly and indirectly impact our economy by, inflating premium costs for employers and individuals, eroding underwriting profit, increasing reserve volatility and straining loss prevention resources.

The sheer magnitude of loss should be a national call to action, not a cause for data hoarding.

The Fear Isn’t Technical…It’s Cultural

Most carriers point to the familiar excuses for why they refuse to participate.  These include data privacy, regulatory risk, competitive sensitivity, security concerns, and the classic “We already provide loss reporting”.

However, these are largely symptoms and not causes.  Modern technology already supports secure, permission-based, role-defined data sharing.  Compliance frameworks exist.  Encryption and API governance all exist today and are common place in the data world.

The real barrier is control.  Claims data has historically been treated as a “carrier-owned asset,” even though it is the insureds who fund the risk.  Many employers with large self-insured retentions retain the exposure.  While large deductible programs shift loss back to the client.  Fraud ultimately hits premiums, reserves, and balance sheets downstream.  When data is hoarded, it reinforces dependency, not partnership.

Fragmentation Is a Gift to Fraud

In the last year, I have been asked several dozen times, how did we arrive here, where did this Fraudemic suddenly come from?  The reality is this didn’t occur over night.  Fraud didn’t evolve to this level because of it’s level of sophistication (that is a more recent development).  It was able to elevate to epidemic levels because of complacency and it’s ability to thrive because of siloed data.

Bad actors exploit the blind spots carrier-by-carrier.  They rely on inconsistent claim handling signals and lack of cross-claim intelligence.  With no shared view of claimant, provider, attorney, or network behavior they were able to capitalize on the fact that each carrier, TPA, or vendor only sees a sliver of the picture, enabling fraud to become statistically invisible.

The result of this, repeat offenders who re-enter the system undetected.  Patterns that reset with every new claim and employers who unknowingly are financing serial abuse.  As we have seen in states like New York, Louisianna, California and more…fraud doesn’t need secrecy to win.  It only requires disconnection.

Loss Runs Do Not Equate to Data Sharing

Every carrier and TPA will tell you that they provide loss runs.  Realistically, they have to upon request, or so you would think.  Believe it or not, there are some carriers who have even limited when they will provide their insureds with this information.  Loss runs however are historical summaries.  In order for employers to proactively manage risk, for brokers to assist in program analysis and for true fraud detection and risk-mitigation, forward-looking intelligence is required.

True data sharing means:

-       Real-time or virtual real time access

-       Structured, usable datasets and not PDF exports

-       Context across claims, vendors and jurisdictions

-       Employer visibility to identify trends, anomalies, and potential exposure

-       The ability to act and not simply react upon retrospective review

Providing insured with a monthly spreadsheet is not empowerment, it is after-the-fact reporting, which in the 80’s was the standard.  But as business, technology and the risks have evolved so must the access to data.

Employers Pay But Don’t See

If you were a fully self-insured or captive structured program, you would have visibility to your claims.  Calling the shots because it’s all your money.  However, if you are an employer with a large, self-insured retention or a high-deductible program, despite being responsible for in many instances millions of dollars, these employers are still treated like passive observers in their own claims’ ecosystem.

This imbalance creates real consequences as employers are unable to truly proactively manage exposures.  Risk managers can’t identify systemic abuse while brokers are unable to advise strategically and defense partners engage too late.  In these situations fraud costs are normalized as “claim severity” and overlooked as a cost of doing business.  Decisions are often made to accommodate the path of least resistance and the overall financial performance of the insurance company, versus the discussions with their insureds on how they would like to handle the claims as well.  Transparency would alter this behavior on all sides.

The Perceived Threat of Data Sharing

Carriers that embrace responsible, structured data sharing don’t lose leverage, they actually gain so much more.  In working with their partners, they build stronger client trust, help to improve loss performance, enable early fraud identification and reduced litigation severity. 

In fact, it is quite the opposite, in that these partners improve their renewal conversations and help to keep the risk in the market by demonstrating their alignment with employer risk strategies.

The carriers that resist transparency will increasingly find themselves out of step with a market demanding accountability, collaboration and intelligence.  A market that is tired of opacity and not only in search of but setting increased expectations from their partners to deliver program intelligence and proactive solutions. 

The result if they do not receive, is that like many employers with large exposures have done, they will pull their risk from the market to create captive or fully self-insured programs.  As one employer in the northeast noted, “We pull more risk from the market each year.  Once we pull it, it is never coming back.”

Not More Data – Shared Data

Let me make this position very clear.  This is not an argument for reckless disclosure or public data dumps.  It is a call for controlled, permission-based access through clear data ownership models.  Employer-centric visibility that provides secure collaboration across stakeholders, providing an industry-wide alignment against fraud versus the isolated defenses of today.

Fraud is a collective problem which cannot be solved in isolation.

The Bottom Line

There are several carriers who have been very amiable to sharing claim data with their clients and/or broker partners.  However, in the Property and Casualty space we still face a majority who remain apprehensive.  If carriers are afraid to share claims data, it is worth asking:

1.     Are they afraid of regulatory risk, or loss of control?

2.     Are they afraid of exposure or accountability?

3.     Are they afraid of misuse or market distruption?

Because the reality is, that the status quo doesn’t protect the industry.  It protects an antiquated system whose inefficiency has created an opportunity which people have exploited to the tune of $308 billion dollars nationally.

Claims data isn’t a byproduct of insurance.  It’s one of its most powerful assets which should rightfully belong to the employers, or minimally shared ownwership of the data.  It is the key to effective risk management and the future of fraud prevention.

Just depends on who is willing to treat it that way.