III IC-39 flashcards
III IC-39 · Build recall with a focused review session.
32 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Fraud Triangle
- A model holding that fraud arises from pressure, opportunity, and rationalization. Insurance controls mainly reduce opportunity through segregation of duties, verification, and monitoring.
- Fraud Diamond
- Extends the fraud triangle with capability, the actor's position or skill to exploit opportunity. Access rights and authority limits are the controls that constrain capability.
- Residual Fraud Risk
- The fraud risk remaining after existing controls are applied. It is calculated from inherent risk and control effectiveness, and it drives escalation and audit priority.
- Segregation of Duties
- A preventive control requiring that selling, paying, and reconciling are performed by different people. It limits the ability of one person to create and conceal a fraudulent payment.
- Application Fraud
- Misrepresentation at quote or bind, such as undisclosed prior losses, false identity, or premium evasion. Controls include identity verification and history checks before cover starts.
- Claims Fraud
- Exaggerated, fabricated, or staged claims, including inflated injury, duplicate invoices, and pre-existing damage. Detection relies on indicators, analytics, and evidence review.
- Internal Fraud
- Fraud by employees or contracted staff, such as payment diversion, data misuse, or collusion with claimants. Controls include least privilege, dual authorization, and monitoring.
- Expected Fraud Loss
- Frequency of fraudulent cases per exposure unit multiplied by average severity per case. It sizes the annual loss for a segment and justifies control investment.
- False Positive Rate
- The share of flagged cases that turn out not to be fraud. It trades off against detection rate and drives investigation workload and customer friction.
- Benford's Law
- A pattern in naturally occurring numbers where leading digits are not uniformly distributed. Deviation in claim amounts is a screening flag, not proof of fabrication.
- Link Analysis
- Detecting fraud rings by mapping shared identifiers such as bank accounts, addresses, phones, and providers across apparently unrelated claims and policies.
- Red Flag
- An indicator statistically associated with fraud, such as late reporting or inconsistent documents. One flag justifies review, not denial; decisions need verified evidence.
- Fraud Risk Register
- A record of each fraud exposure with inherent risk, control effectiveness, residual risk, owner, and review date. It drives escalation and audit planning.
- Three Lines Model
- Business owns fraud controls, a fraud function sets standards and investigates, and internal audit assures independently. Clear roles prevent gaps and duplication.
- Fraud Risk Appetite
- Stated tolerance thresholds for fraud loss and risk, defining when escalation, investigation, or law enforcement referral becomes mandatory rather than optional.
- Whistleblowing Channel
- A confidential reporting route independent of line management, with logged reports and non-retaliation protection. Effectiveness is shown by report volume and follow-up.
- Suspicious Activity Report
- A regulatory filing for suspected money laundering, separate from claims handling. It is usually made without tipping off the customer.
- Policy Voidance
- A remedy that treats the policy as invalid because of material misrepresentation. The applicable legal test depends on the wording and jurisdiction.
- Subrogation
- Recovery from a third party responsible for a loss. It is separate from fraud recovery against the insured and follows its own evidentiary requirements.
- Chain of Custody
- A documented record of who held evidence, when, and for what purpose. Gaps can undermine recovery, disciplinary action, and legal proceedings.
- Alert Disposition Code
- A standard outcome label such as confirmed fraud, not fraud, or inconclusive. It enables measurement of model precision and investigator consistency.
- Override Report
- A listing of manual exceptions to system rules or authority limits. Frequent or unexplained overrides often precede internal fraud discovery.
- Dual Authorization
- A payment control requiring two independent approvals above a risk-based threshold. It prevents one person from creating and releasing a fraudulent payment.
- Callback Verification
- Confirming bank or contact detail changes by calling a known number from records, not the number supplied in the request. It blocks account-change fraud.
- Peer Group Comparison
- Benchmarking a claim or policy against similar risks by product, geography, and history. It reduces false alerts from legitimately unusual risks.
- Straight-Through Processing
- Automated handling of low-risk claims without manual review. It requires post-payment sampling, otherwise automated payments become a low-risk fraud target.
- Post-Payment Sampling
- Reviewing a sample of automatically paid claims after payment. It detects fraud and control failure that straight-through processing would otherwise miss.
- Typology
- A documented pattern of fraud, such as staged accidents or premium diversion. Typologies map to specific controls and must be refreshed when products or channels change.
- Control Effectiveness Rating
- A judgement separating designed effectiveness from operating effectiveness. A well-designed control that is not performed provides no assurance.
- Root Cause Category
- A classification of control failure: absent, poorly designed, not operated, or deliberately circumvented. Each category implies a different remediation approach.
- Fraud Risk Taxonomy
- A structured list of fraud types across applications, claims, internal activity, distribution, and money laundering. Controls are mapped to each type.
- Case Prioritization Rule
- Rank investigations by expected recoverable amount multiplied by probability of proven fraud, divided by investigation cost. It allocates limited investigator capacity.