14. Risk, Compliance, Ethics and Operational Resilience

Introduction and Context

Insurance operations are often described as a sequence of underwriting, policy administration, premium collection, claims settlement and customer service. In practice, however, every operational decision also carries regulatory, ethical, financial, technological and reputational consequences. A policy may be issued accurately but unlawfully; a claim may be processed efficiently but unfairly; customer data may be collected for legitimate purposes but exposed through weak access controls. Operational excellence therefore cannot be separated from governance and risk management.

For an insurer, risk is not limited to the risks transferred by policyholders. The insurer itself faces conduct risk, compliance risk, fraud risk, cyber risk, operational disruption, third-party risk and strategic risk. These risks may interact. A poorly designed sales incentive can produce mis-selling, generate complaints, create regulatory scrutiny and increase future claims disputes. A failure to screen a customer or beneficiary may expose the insurer to sanctions or money-laundering risk. A cyber incident may interrupt claims payments precisely when customers are most vulnerable.

This chapter examines the control environment required to manage these exposures. It focuses on regulatory compliance, fair customer treatment, KYC and AML, sanctions, privacy, cybersecurity, fraud control, segregation of duties, business continuity, third-party oversight, auditability and ethical decision-making. The central argument is that resilience is not simply the ability to restore systems after an incident. It is the capacity to continue delivering critical customer and market functions while preserving legality, integrity, accountability and trust.

Learning Objectives

After studying this chapter, the learner should be able to:

1. Explain the relationship between operational risk, compliance, conduct and resilience in insurance.

2. Design a risk-based control framework for policy and claims administration.

3. Apply principles of fair customer treatment, KYC/AML, sanctions compliance and privacy protection.

4. Evaluate cybersecurity, fraud, third-party and business-continuity risks.

5. Explain the importance of segregation of duties, audit trails and management information.

6. Analyse ethical dilemmas involving customers, intermediaries, claims and technology.

7. Recommend improvements to an insurer’s governance and operational-resilience arrangements.

The Governance Architecture of Insurance Operations

A useful starting point is the distinction between risk management and compliance. Risk management identifies uncertainty that may prevent the organisation from achieving its objectives and determines how that uncertainty should be treated. Compliance focuses on adherence to laws, regulations, supervisory expectations, contractual duties, internal policies and accepted standards of conduct. Compliance is therefore one component of the broader control system, although regulatory breaches are themselves operational and reputational risks.

Most insurers use a three-lines model. The first line consists of business and operational managers who own risks and operate controls. Underwriting, claims, finance, distribution and information technology cannot delegate their accountability merely because a compliance department exists. The second line includes risk management, compliance, information security, data protection and financial-crime functions. These functions establish standards, advise the first line, monitor risk and challenge decisions. The third line is internal audit, which provides independent assurance on governance, risk management and control effectiveness. External audit, regulators and supervisors provide additional but distinct forms of assurance.

The board is responsible for setting the tone, approving risk appetite and ensuring that material risks are understood. Senior management translates this direction into policies, procedures, authority limits, systems and performance measures. A strong control environment has five characteristics: clear accountability, proportionate controls, reliable information, independent challenge and timely escalation. A policy that exists only in a manual but is not understood or monitored is not an effective control.

Risk Appetite and Control Design

Risk appetite states the level and type of risk an insurer is willing to accept in pursuit of its objectives. It should be expressed in operationally meaningful terms. For example, an insurer may specify tolerance for claim-payment delays, unresolved complaints, system downtime, privileged-access violations, data breaches or sanctions-screening exceptions. Risk appetite should be linked to thresholds and escalation rules rather than remaining a general statement of managerial preference.

Controls may be preventive, detective or corrective. A system rule preventing an employee from approving a transaction that the employee created is preventive. A daily exception report identifying unusual claim payments is detective. Suspending a compromised account and restoring affected services is corrective. Controls may also be manual, automated or hybrid. Automation improves consistency and scale, but it does not eliminate the need for governance, testing and human judgement.

A risk and control self-assessment normally identifies processes, risks, inherent exposure, existing controls, residual exposure, control owners and planned actions. Key risk indicators may include complaint volumes, repeat claims adjustments, policy cancellations shortly after sale, failed identity checks, overdue reconciliations, privileged-access exceptions and recovery-test failures. Indicators are useful only when thresholds lead to investigation and action.

Fair Customer Treatment and Conduct Risk

Conduct risk is the possibility that the behaviour of an insurer, intermediary or employee produces unfair outcomes for customers or undermines market integrity. It extends beyond intentional misconduct. Poor product design, confusing communication, inaccessible processes, unsuitable incentives and unreasonable delay may all create harmful outcomes even where no employee deliberately intends to cause harm.

Fair treatment should be considered throughout the product life cycle. Before launch, the insurer should identify the target market, customer needs, exclusions, affordability issues and foreseeable misuse. During distribution, information must be clear, timely and not misleading. At the point of claim, customers should receive consistent explanations, reasonable requests for evidence and appropriate support. Complaints should be treated as information about possible systemic weaknesses, not merely as cases to be closed.

A conduct-risk framework asks four questions: What outcome is the customer likely to experience? Which groups may be vulnerable? What incentives influence the employee or intermediary? What evidence demonstrates that the intended outcome is actually occurring? Vulnerable customers may include persons affected by illness, disability, bereavement, financial distress, language barriers or limited digital access. Fairness does not always mean identical treatment; reasonable adjustments may be necessary to achieve equitable access.

Remuneration and sales targets require particular attention. A commission arrangement that rewards volume without considering persistency, suitability, complaints or cancellation may encourage mis-selling. Balanced scorecards can reduce this risk by incorporating quality and customer-outcome measures. However, metrics can also be manipulated. Managers should combine quantitative indicators with quality reviews, customer feedback and independent sampling.

KYC, AML and Sanctions Controls

Know Your Customer (KYC) refers to the processes used to establish and verify customer identity, understand the nature and purpose of the relationship and maintain current information. Anti-money-laundering (AML) controls seek to prevent the insurer and its products from being used to disguise the origin of criminal proceeds or finance unlawful activity. Requirements vary by jurisdiction and product, but the underlying principle is a risk-based approach.

Customer due diligence generally includes identification and verification, beneficial-ownership analysis where relevant, understanding the customer’s business or source of funds, screening against sanctions and politically exposed person indicators, and ongoing monitoring. Enhanced due diligence may be required for higher-risk customers, unusual transactions, complex ownership structures, high-risk jurisdictions or products with significant surrender or investment features. Simplified procedures should never be treated as permission to ignore legal requirements.

An insurer should distinguish between a false positive and a genuine alert. Name-matching systems may identify customers whose names resemble sanctioned persons. The alert must be investigated using additional identifiers such as date of birth, nationality, address and ownership information. A confirmed or unresolved sanctions concern should be escalated in accordance with law and internal policy. Staff must not alert a customer that a suspicious-transaction review or report is being considered where such disclosure is prohibited.

AML controls should continue after onboarding. Changes in ownership, beneficiary, payment pattern, premium source, surrender behaviour or intermediary involvement may alter risk. Employees need clear escalation routes and protection from retaliation when raising concerns. The compliance function should test the quality of alerts, case decisions, documentation and reporting timeliness.

Privacy, Confidentiality and Cybersecurity

Insurance depends on extensive personal information, including identity data, financial records, health information, employment details, driving history and claims evidence. Privacy governance requires the insurer to identify a lawful basis for processing, collect information for specified purposes, limit collection to what is necessary, retain it only as long as justified, maintain accuracy and protect it from unauthorised access or disclosure. The precise legal requirements depend on the applicable jurisdiction, but accountability and purpose limitation are widely recognised principles.

Privacy risk arises across the data life cycle: collection, storage, use, sharing, archival and destruction. Customer notices should explain relevant processing in understandable terms. Access should follow the need-to-know principle. Sensitive data should receive stronger controls, including encryption, restricted access, monitoring and secure disposal. Data-sharing agreements with reinsurers, claims investigators, medical providers, cloud providers and intermediaries should define purpose, security, confidentiality, breach notification and deletion responsibilities.

Cybersecurity is the protection of confidentiality, integrity and availability. Common threats include phishing, ransomware, credential theft, insider misuse, insecure application interfaces and supply-chain compromise. Essential controls include multi-factor authentication, least-privilege access, network segmentation, secure configuration, vulnerability management, logging, backups, endpoint protection and employee awareness. Backups must be protected from the same attack that affects production systems and must be tested through restoration exercises.

Incident response should specify how an event is detected, contained, investigated, communicated and remediated. Legal, regulatory and contractual notification duties may apply. Communication should be accurate, timely and coordinated; concealing a material incident may increase legal and reputational consequences. Cybersecurity is not solely an IT responsibility. Claims and policy teams must understand how to identify suspicious requests, verify changes to bank details and continue essential services during an outage.

Fraud Risk and the Integrity of Transactions

Insurance fraud may involve fabricated losses, inflated claims, staged accidents, false documentation, collusion, premium evasion, identity misuse or internal manipulation of records. Fraud control should not presume that every claimant is dishonest. Excessively aggressive investigation can delay legitimate claims, breach privacy expectations and damage customer trust.

A balanced fraud programme combines prevention, detection, investigation and recovery. Preventive measures include identity verification, clear underwriting information, secure payment processes and employee rotation in sensitive roles. Detection may use rules, network analysis, anomaly detection and claims analytics. Indicators should trigger proportionate review rather than automatic rejection. Investigators need documented standards of evidence, conflict-of-interest safeguards and procedures for preserving records.

Analytics and artificial intelligence can identify unusual relationships, repeated addresses, improbable timing or inconsistent claim patterns. Yet models may reproduce historical bias, generate false positives or be difficult to explain. Human review, model validation, data-quality controls and appeal mechanisms are necessary where automated outputs affect customer rights or access to benefits. Fraud prevention must remain consistent with non-discrimination, due process and privacy obligations.

Segregation of Duties and Auditability

Segregation of duties reduces the possibility that one person can initiate, approve, execute and conceal an improper transaction. In policy administration, the employee who creates a policy should not independently approve an exceptional discount and release the commission. In claims, the person who changes reserve values should not be the sole approver of a large payment. In finance, bank-account changes should require independent verification and approval.

Perfect segregation is not always possible in small operations. Compensating controls may include supervisory review, automated limits, independent reconciliations, exception reporting, mandatory leave and periodic audit. The control objective is more important than a particular organisational chart.

Auditability means that a knowledgeable reviewer can reconstruct what happened, who acted, what information was available, which rule applied and why the decision was made. Effective audit trails record user identity, date and time, original and amended values, approval status, relevant communications and system-generated events. Logs must be protected against unauthorised alteration and retained in accordance with legal and business requirements. Documentation should explain judgement, not merely preserve clicks.

Business Continuity and Operational Resilience

Business continuity planning traditionally focused on recovering facilities, people and technology after a disruptive event. Operational resilience is broader. It begins by identifying important business services, such as issuing legally valid policies, receiving premiums, authorising urgent claims payments or responding to regulatory requests. The insurer then determines the maximum tolerable disruption, maps dependencies and tests whether the service can remain within that tolerance during severe but plausible scenarios.

Business-impact analysis considers the effects of outage over time, including customer harm, legal consequences, financial loss and reputational damage. Recovery time objectives indicate how quickly a process should resume; recovery point objectives indicate how much data loss is acceptable. These are useful technical measures, but they should be derived from customer and business-service priorities.

A continuity plan should address people, premises, technology, data, suppliers, communications and decision rights. Scenarios may include cyberattack, pandemic-related absence, cloud-provider failure, loss of a call centre, payment-system interruption, natural disaster or simultaneous claims surge. Plans must be exercised. Tabletop discussions test governance and judgement; technical failover tests test systems; full simulations test coordination. Findings should produce named actions, deadlines and retesting.

During a disruption, leaders must balance speed with control. Emergency procedures may permit temporary workarounds, but they should define approval limits, evidence requirements, reconciliation and post-event review. Customers should not be exposed to avoidable harm merely because normal systems are unavailable.

Third-Party and Outsourcing Risk

Outsourcing does not transfer accountability. An insurer remains responsible for understanding risks created by administrators, brokers, medical assessors, cloud providers, call centres, investigators and payment processors. Due diligence should evaluate financial condition, competence, security, resilience, regulatory history, subcontracting and conflicts of interest.

Contracts should establish service levels, data ownership, confidentiality, access rights, audit rights, incident notification, business-continuity obligations, exit assistance and requirements for subcontractors. Service-level measures should include quality and customer outcomes, not merely transaction speed. Ongoing monitoring may include performance dashboards, control attestations, site reviews, penetration-test evidence, complaint analysis and independent assurance reports.

Concentration risk deserves attention. Several critical services may depend on one technology provider, jurisdiction, telecommunications network or specialist supplier. A low-cost outsourcing decision may create unacceptable dependency. Exit strategies should be credible, including data portability, alternative suppliers and the ability to operate temporarily in-house.

Ethical Decision-Making in Insurance Operations

Rules cannot anticipate every situation. Employees may face pressure to reduce claims costs, meet sales targets, avoid escalation or use customer data for an attractive commercial purpose. Ethical decision-making provides a disciplined method for handling such ambiguity.

A practical ethical test is to ask: Is the action lawful? Is it consistent with the customer’s reasonable interests? Would it be defensible to the board, regulator and an affected customer? Does it respect privacy, dignity and equality? Would the decision remain acceptable if publicly disclosed? Who bears the benefit and who bears the risk? These questions do not replace law or policy, but they expose rationalisations that formal compliance may miss.

Ethical culture depends on leadership behaviour. If managers praise results while ignoring how those results were achieved, written values have little effect. Employees need speak-up channels, protection against retaliation, conflict-of-interest declarations and training based on realistic dilemmas. Whistleblowing should be investigated independently and proportionately. Ethical governance also requires accepting that some profitable business should be declined when it creates unacceptable legal, social or customer harm.

An Integrated Control Cycle

Risk and compliance controls should operate as a cycle rather than a one-time exercise. First, the insurer identifies obligations, risks, affected stakeholders and critical services. Second, it assesses likelihood, impact, vulnerability and interdependence. Third, it selects controls that are proportionate to the exposure. Fourth, it assigns ownership and embeds controls in systems and procedures. Fifth, it monitors outcomes through indicators, quality assurance, complaints, incidents and audits. Finally, it learns from failures, near misses, regulatory findings and changing technology.

A mature framework distinguishes control design from control effectiveness. A requirement for dual approval may be well designed but ineffective if supervisors approve automatically. A cybersecurity policy may be comprehensive but ineffective if privileged accounts are never reviewed. Testing should therefore examine whether controls operate consistently, identify exceptions and assess whether they achieve the intended outcome.

Illustrative Case: The Disrupted Claims Platform

Background

Harbour Shield Insurance, a fictional regional insurer, outsourced its claims platform and payment processing to a technology provider. The arrangement reduced processing costs and enabled digital claims submission. The insurer retained responsibility for customer service, claims decisions, data governance and regulatory reporting.

Situation and Problem

A ransomware incident disabled the claims platform at the beginning of a severe storm season. Customer records were temporarily unavailable, payment instructions could not be verified electronically and call-centre staff received a large volume of urgent requests. The provider’s contract required notification within twenty-four hours, but the insurer had not tested the provider’s recovery arrangements. Managers considered paying claims manually from email instructions and temporarily relaxing identity checks.

Analysis

The incident was not only a technology failure. It threatened customer welfare, privacy, fraud control, sanctions compliance, financial reporting and regulatory obligations. Manual processing could help vulnerable customers but might also enable payment diversion or duplicate settlement. The insurer’s dependence on one provider revealed concentration risk, while the absence of tested alternatives showed that the continuity plan was largely documentary.

Approach and Solution

The incident committee activated a critical-service continuity plan. Urgent claims were triaged according to customer vulnerability and immediate safety needs. Temporary payments required two-person approval, independent telephone verification using pre-existing records and subsequent reconciliation. No bank-account change was accepted solely by email. The legal and privacy teams assessed notification duties, while communications staff issued clear instructions to customers about legitimate contact channels.

The insurer obtained read-only access to protected backup data, established a temporary claims register and required daily reconciliation between manual and restored records. It also commissioned an independent review of the provider, tested restoration, revised contractual audit and notification clauses, and developed a second processing capability for priority services.

Outcome

Essential claims services continued, although processing slowed and some customers experienced delay. The insurer identified weaknesses in provider oversight, identity verification during manual workarounds, backup testing and executive escalation. It introduced service-level measures based on customer harm, quarterly resilience exercises and a board dashboard covering critical suppliers and recovery performance.

Learning Points

The case demonstrates that resilience is an organisational capability rather than a backup system. Emergency flexibility must be accompanied by compensating controls. Third-party dependence requires active oversight, contractual rights and credible exit arrangements. Most importantly, continuity decisions should preserve both customer access and the integrity of the insurance system.

Challenges, Limitations and Common Mistakes

Several weaknesses recur in insurance control environments. A compliance function may be treated as the owner of every risk, weakening business accountability. Policies may be copied from generic templates and fail to reflect actual workflows. Training may test memory rather than judgement. Key risk indicators may measure activity instead of outcomes. Excessive reliance on automated screening can create unexplained exclusions, while excessive manual review can create inconsistency and delay.

Another common mistake is to treat audits and certifications as proof that risk is controlled. Assurance is valuable, but a clean review may reflect limited scope, weak evidence or a process that changed after testing. Management must understand residual risk and the assumptions underlying controls. Finally, resilience plans often focus on restoring technology while neglecting suppliers, staff capacity, customer communication, regulatory reporting and ethical trade-offs.

Technology and Emerging Developments

Cloud services, robotic process automation, advanced analytics and generative AI are changing policy and claims operations. They can improve consistency, identify anomalies and support employee decisions. They also introduce model risk, data leakage, explainability problems, excessive automation and new third-party dependencies.

Governance should define permitted uses, data restrictions, approval requirements, human oversight, monitoring, model validation and incident escalation. AI-generated communications require review for accuracy, fairness and confidentiality. Automated decisions affecting underwriting, pricing or claims should be explainable to an appropriate degree and subject to correction or appeal where required. Emerging regulation increasingly emphasises accountability for digital systems, resilience, privacy and demonstrable customer protection.

Best-Practice Principles

A strategically sound control environment generally follows these principles:

• assign clear ownership for every material risk and control;
• design controls around customer and service outcomes, not paperwork alone;
• apply proportionate, risk-based KYC, AML, sanctions and fraud measures;
• protect sensitive data through least privilege, secure design and tested response;
• separate incompatible duties and preserve reliable audit trails;
• monitor third parties as extensions of the operating model;
• test continuity against severe but plausible scenarios;
• use automation with human accountability and model oversight;
• encourage challenge, ethical escalation and learning from near misses; and
• provide boards and senior managers with timely, decision-useful information.

Chapter Summary

Insurance operations require an integrated approach to risk, compliance, ethics and resilience. The three-lines model allocates ownership, challenge and assurance. Risk appetite, control assessments and meaningful indicators help management understand residual exposure. Fair customer treatment requires attention to product design, distribution, claims, complaints and vulnerable customers. KYC, AML and sanctions controls must be risk-based and supported by ongoing monitoring. Privacy and cybersecurity protect the information on which insurance depends.

Fraud controls should be proportionate and compatible with fairness. Segregation of duties, audit trails and independent review reduce the risk of error and abuse. Operational resilience focuses on important services, tolerable disruption, dependencies and tested recovery. Outsourcing does not remove accountability, and ethical judgement is necessary where rules do not provide a complete answer. Technology can strengthen controls, but it also creates model, privacy, cyber and concentration risks. Effective governance is therefore demonstrated not by the existence of policies, but by reliable outcomes, evidence, challenge and continuous learning.

Key Terms

Risk appetite: The level and type of risk an organisation is willing to accept in pursuit of its objectives.

Operational risk: The risk of loss or harm arising from failed processes, people, systems or external events.

Conduct risk: The risk that organisational behaviour produces unfair customer or market outcomes.

Three-lines model: A governance arrangement distinguishing operational ownership, specialist oversight and independent assurance.

KYC: Processes for identifying, verifying and understanding a customer and relationship.

AML: Measures designed to prevent money laundering and the use of insurance for criminal proceeds.

Sanctions screening: Checking customers, transactions and relevant parties against legally restricted-person or jurisdiction lists.

Enhanced due diligence: Additional investigation and monitoring applied to higher-risk relationships.

Beneficial owner: The individual who ultimately owns or controls a customer or arrangement.

Privacy: The responsible and lawful collection, use, sharing, retention and protection of personal information.

Cybersecurity: Protection of information and systems against unauthorised access, disruption, alteration or destruction.

Segregation of duties: Separation of incompatible responsibilities to reduce error, fraud and concealment.

Audit trail: A reliable record showing actions, users, times, changes, approvals and decisions.

Business continuity: Arrangements for maintaining or restoring essential activities during disruption.

Operational resilience: The ability to continue important services within accepted tolerances during severe disruption.

Third-party risk: Exposure arising from suppliers, outsourcers, intermediaries or service providers.

Key risk indicator: A measure that signals changing exposure or possible control weakness.

Model risk: The possibility that an analytical or automated model produces inaccurate, biased or inappropriate results.

Ethical escalation: Raising a concern when conduct may be unlawful, unfair, unsafe or inconsistent with professional values.

Review Questions

Short Answer Questions

1. Distinguish between compliance risk and operational risk.

2. What are the three lines in the three-lines model?

3. Why is ongoing monitoring important after KYC onboarding?

4. Explain the purpose of segregation of duties.

5. What is meant by an important business service?

Long Answer Questions

1. Explain how fair customer treatment should influence product design, distribution, claims and complaints management.

2. Discuss the components of a risk-based AML and sanctions-control framework for an insurer.

3. Analyse the relationship between privacy governance and cybersecurity in policy administration.

4. Explain how an insurer can design and test an operational-resilience programme.

5. Discuss why outsourcing does not transfer accountability from an insurer to its service providers.

Analytical / Application Questions

1. An insurer’s claims algorithm flags customers from one geographic area at an unusually high rate. How should management investigate the issue while maintaining fraud controls and fair treatment?

2. A senior sales manager pressures employees to meet targets by reducing disclosure of exclusions. Identify the risks, ethical issues and controls that should be applied.

3. During a cyber outage, the insurer must process urgent claims manually. Design a temporary control procedure that balances speed, customer support, fraud prevention, privacy and auditability.

22. Multiple Choice Questions with Answers

Question 1

Which activity belongs primarily to the first line of the three-lines model?

A. Operating controls and owning risks in underwriting or claims

B. Providing independent assurance through internal audit

C. Setting supervisory rules for the insurance market

D. Reviewing the external auditor’s financial opinion

Correct Answer: A. Operating controls and owning risks in underwriting or claims

Question 2

Which example best illustrates conduct risk?

A. A firewall blocks an unauthorised login

B. A sales incentive encourages unsuitable policies that are later cancelled

C. A backup is stored in a separate data centre

D. A reconciliation identifies a timing difference

Correct Answer: B. A sales incentive encourages unsuitable policies that are later cancelled

Question 3

Why is ongoing monitoring required after customer onboarding?

A. Customer risk, ownership and transaction patterns may change

B. It eliminates the need for initial identity verification

C. It permits the insurer to ignore sanctions screening

D. It guarantees that every customer is low risk

Correct Answer: A. Customer risk, ownership and transaction patterns may change

Question 4

A sanctions alert produces a name match but different dates of birth and addresses. What is the most appropriate response?

A. Automatically reject the customer without review

B. Ignore the alert because name matches are never useful

C. Investigate using additional identifiers and document the decision

D. Tell the customer that a suspicious report will be filed

Correct Answer: C. Investigate using additional identifiers and document the decision

Question 5

Which control most directly supports auditability?

A. Allowing shared employee passwords

B. Recording users, timestamps, amendments and approvals

C. Deleting transaction records after settlement

D. Permitting undocumented emergency overrides

Correct Answer: B. Recording users, timestamps, amendments and approvals

Question 6

What is the principal purpose of segregation of duties?

A. To ensure one employee controls an entire transaction

B. To reduce the opportunity for error, fraud and concealment

C. To eliminate the need for supervisory review

D. To transfer accountability to the compliance department

Correct Answer: B. To reduce the opportunity for error, fraud and concealment

Question 7

Operational resilience differs from a narrow disaster-recovery plan because it focuses primarily on:

A. Replacing all manual processes with automation

B. Continuing important services within acceptable disruption limits

C. Reducing the number of insurance products offered

D. Recovering only the insurer’s head-office building

Correct Answer: B. Continuing important services within acceptable disruption limits

Question 8

Which statement about outsourcing is correct?

A. Outsourcing transfers all regulatory accountability to the supplier

B. The insurer remains responsible for understanding and managing third-party risk

C. A contract makes supplier monitoring unnecessary

D. Only financial suppliers require due diligence

Correct Answer: B. The insurer remains responsible for understanding and managing third-party risk

Question 9

Why should AI-based fraud indicators not automatically determine claim rejection?

A. Analytics cannot process any insurance data

B. Automated outputs may contain bias or false positives and require review

C. Fraud controls are prohibited when technology is used

D. Human judgement always produces identical outcomes

Correct Answer: B. Automated outputs may contain bias or false positives and require review

Question 10

During a claims-system outage, which temporary control is most appropriate?

A. Accepting bank-account changes solely by email

B. Removing identity checks to maximise speed

C. Using dual approval, independent verification and later reconciliation

D. Allowing one employee to create and release every payment

Correct Answer: C. Using dual approval, independent verification and later reconciliation