Guarantee Fund dramatically reduces insurance fraud

Gaining a comprehensive, accurate view of automobile insurance policies across Bulgaria

Published on 01 Mar 2013

"Deploying the IBM solution has helped us achieve our goal of truly reshaping the Bulgarian motor industry." - Donka Tileva, CIO, Guarantee Fund

Customer:
Guarantee Fund

Industry:
Insurance

Deployment country:
Bulgaria

Solution:
BA - Business Analytics, BA - Business Intelligence, BA - Predictive Analytics, Big Data & Analytics, Big Data & Analytics: Customers, Big Data & Analytics: Operations/Fraud/Threats, High Availability , Industry Framework , Information Management Foundation, Smarter Computing

Smarter Planet:
Smarter Insurance

IBM Business Partner:
Musala Soft Ltd.

Overview

The Guarantee Fund is a Bulgarian organization established to support the country’s motor insurance industry with administrative services. Headquartered in Sofia, Bulgaria, its mission is to help create a climate of competency, sustainability, fairness and transparency in the motor third party liability (MTPL) insurance business. The organization was established in 1997 and helps ensure that both Bulgarian and European Union standards are observed.

Business need:
Guarantee Fund, an organization responsible for supporting the motor insurance industry in Bulgaria, saw an opportunity to boost accuracy and fairness for more than 3.3 million registered drivers. If Guarantee Fund could address fraud rates of 25 percent, it could help lower costs for insurers while protecting law-abiding drivers from artificially raised premiums.

Solution:
Working with IBM Premier Business Partner Musala Soft Ltd., Guarantee Fund developed an innovative solution that integrates driving records with insurance histories, using sophisticated data mining and visualization techniques to uncover duplications and falsifications.

Benefits:
Enabled faster and more accurate decisions regarding risk and pricing. Expected to reduce duplication of records to virtually zero percent by 2013. Reduced the number of drivers violating the mandatory insurance coverage law by 12 percent.

Case Study

To read a Bulgarian version, click here.

The Guarantee Fund is a Bulgarian organization established to support the country’s motor insurance industry with administrative services. Headquartered in Sofia, Bulgaria, its mission is to help create a climate of competency, sustainability, fairness and transparency in the motor third party liability (MTPL) insurance business. The organization was established in 1997 and helps ensure that both Bulgarian and European Union standards are observed.

Driving down fraud

There are 26 active companies providing general insurance in Bulgaria, and more than 350 insurance brokers operating in the country, serving over 3.3 million registered drivers. With 67 percent of insurers’ business represented by compulsory MTPL policies, minimizing fraud and maximizing efficiency were high priorities. When a study found that an estimated 25 percent of all motor insurance policies in the country were duplicates or false, Guarantee Fund recognized an opportunity to transform the insurance industry in Bulgaria by developing a system that would make it much harder to succeed in defrauding insurers.

As Donka Tileva, CIO at Guarantee Fund, explains: “The old policy registration system allowed users to create policies without connecting to our central systems, which meant that it was technically possible to issue a MTPL policy without informing the Guarantee Fund or the relevant regulatory bodies. This was leading to serious issues such as delays in registering a policy, retroactive dating and duplicated policies.”

Selecting IBM above the competition

As a result, Guarantee Fund initiated the Electronic Information System for Risk Assessment, Management and Control—or EISRAMC—project. This project’s aims were to centralize insurance data, increase transparency, replace paper policies with electronic versions, boost efficiency, provide data for rapid and accurate decision-making, and most importantly, improve service to law-abiding citizens.

“We embarked on a general review of available technological stacks and architectures, and based on the results, decided on a service-oriented architecture,” says Donka Tileva. “We narrowed down the options to just two vendors: IBM and Oracle. Ultimately, the superior price-performance ratio of the IBM solution won the deal.”

Journey to Smarter Computing

Working with Musala Soft Ltd., an IBM Premier Business Partner, Guarantee Fund developed a data warehouse solution based on IBM® DB2®, IBM InfoSphere® Warehouse and IBM WebSphere® Enterprise Service Bus software. IBM Cognos® Business Intelligence offers powerful real-time analytics capabilities. The solution runs on two IBM Power® 570 servers running the IBM AIX® operating system, with two IBM System Storage® DS8300 disk arrays providing storage, offering the ideal infrastructure for mixed workloads on distributed systems. A single IBM Power 570 server and IBM System Storage DS8300 disk array reside at each of the organization’s primary and data recovery sites, with IBM Global Technology Services providing ongoing maintenance for the solution.

“We feel that we have gained a truly enterprise-class solution in our IBM Power Systems infrastructure,” comments Donka Tileva. “So far, the servers have met our target of 99.99 percent availability, enabling us to deliver real-time, always-on services to insurers—just as we promised when we initiated this project. The highly flexible Power Systems architecture helps us manage peaks in demand, such as the 30 percent peak in MTPL policy renewal we always experience around Christmas. All this is achieved at a very reasonable total cost of ownership.”

Transforming the Bulgarian MTPL insurance industry

The IBM solution replaces the offline insurance policy registration system with an integrated solution that connects insurance companies, the Guarantee Fund, the Financial Supervision Commission and the Bulgarian Traffic Police to a centralized National Central Insurance Register. As a result, requests to initiate new MTPL policies automatically notify the Guarantee Fund and regulatory bodies, while ensuring that insurers have information on driving behavior and historical insurance information at their fingertips.

“Deploying the IBM solution has helped us achieve our goal of truly reshaping the Bulgarian motor industry,” says Donka Tileva. “By bringing the MTPL policy registration system ‘online’ we gain an end-to-end view of each Bulgarian driver’s history. This has helped us to dramatically reduce fraud—for example, it eliminates the possibility of duplicating or back-dating insurance policies, or initiating a policy without reporting it to the necessary authorities. We expect to cut down duplication of records to virtually zero percent by 2013, while progressively reducing the incidence of fraudulent claims.

“We also have a much more accurate view of the number of insured automobiles in Bulgaria,” continues Donka Tileva. “In fact, within just three months of implementation we saw a 12 percent reduction in the number of drivers violating the mandatory insurance coverage law—and we expect this statistic will continue to improve. Part of this is due to the access that the Bulgarian traffic police now have to real-time insurance information—enabling them to identify uninsured drivers on the spot.”

Rewarding good driving behavior

IBM InfoSphere Warehouse offers Guarantee Fund a complete data warehouse solution, enabling the organization to manage the huge amounts of data generated by millions of registered drivers. With access to a single, trusted source of information, Guarantee Fund can now utilize IBM Cognos Business Intelligence software running on workload optimized Power Systems to drive sophisticated analytics, yielding valuable insights into Bulgaria’s motor insurance information that simply were not possible before.
“For the first time we are able to run large-scale analytics on a comprehensive database of driver information,” explains Donka Tileva. “We can track good and bad driving behavior, and thereby reward good drivers with better insurance premiums. The IBM solution allows us to identify common risk factors and uncover anomalies that indicate fraud in real-time, helping us clamp down on illegal dealings as soon as they occur. Ultimately this is expected to introduce major savings to both the insurance industry, and law-abiding drivers.”

Components

IBM products and services that were used in this case study.

Hardware:
Power 570, Storage, Storage: DS8300

Software:
AIX, DB2 for Linux, UNIX and Windows, Cognos Business Intelligence, InfoSphere Warehouse

Operating system:
AIX

Service:
GTS Technical Support Services: Hardware Maintenance

Legal Information

© Copyright IBM Corporation 2013 IBM Corporation New Orchard Road Armonk, NY 10504 Produced in the United States of America February 2013 IBM, the IBM logo, ibm.com, AIX, Cognos, DB2, Global Technology Services, InfoSphere, Power, Power Systems, System Storage, and WebSphere are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at “Copyright and trademark information” at ibm.com/legal/copytrade.shtml Linux is a registered trademark of Linus Torvalds in the United States, other countries, or both. Windows is a trademark of Microsoft Corporation in the United States, other countries, or both. UNIX is a registered trademark of The Open Group in the United States and other countries. This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. The client examples cited are presented for illustrative purposes only. Actual performance results may vary depending on specific configurations and operating conditions. THE INFORMATION IN THIS DOCUMENT IS PROVIDED “AS IS” WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided.

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