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FRISS (Utrecht, Netherlands) has strengthened its U.S. presence and moved further in its goal to provide a global standard in end-to-end fraud, risk and compliance technology through its acquisition of Polonious Systems (Boynton Beach, Fla.), a provider of software for special investigations and case management, announced earlier this week. This acquisition follows that of Terrene Labs, a provider of comprehensive risk insights to commercial insurers, about a year ago, and the raising of $65 million in a series B funding round led by Accel-KKR (Menlo Park, Calif.) in mid-2021. FRISS received a further investment from Guidewire Software (San Mateo, Calif.) before the end of 2021. IIR spoke with Jeroen Morrenhof and Rick Shepherd, the CEOs of FRISS and Polonious Systems, respectively, during a break in the action at the Insurance Fraud Management (IFM) Conference at the Omni Resort in Orlando, Fla.
Insurance Innovation Reporter: What does the Polonious acquisition mean for FRISS’s trajectory as a player in the North American market, and for its global ambitions as the provider of an end-to-end solution?
Jeroen Morrenhof, CEO, FRISS: We see it as unlocking huge potential. The acquisitions of both Terrene and Polonious are accelerating our presence in this market, not only with customers but also employees, and in terms of knowledge and subject matter expertise. When people think about insurance fraud, they tend to think about fighting the bad guys. However, we believe ultimately that it’s better to understand fraud schemes before they grow, and even better to prevent them at the underwriting stage, hence why we provide products from underwriting all the way through investigations. This acquisition helps us to expand our already robust suite of products to make honest insurance a reality for carriers globally.
IIR: And that bears on the Terrene acquisition.
Jeroen Morrenhof, CEO, FRISS.
JM: Yes. Underwriting is a big part of our business, accounting for more than a third of our revenue. For underwriting, it’s crucial to have a great deal of data, and Terrene, now FRISS Underwriting Insights, provides that. When you’re presented with a new policy application you don’t know anything about the person or company who submitted it. You need data, and the traditional way to procure it is through answering a lot of questions and having the applicant fill in all sorts of forms. Terrene is essential at that stage of the process, pulling in relevant data, and reducing underwriting time from 5-7 days to 5-7 seconds.
The Polonious acquisition ties into that as well through its case management system for investigators. It makes their work more efficient through optimized workflows, but there’s even greater value in the data Polonious has about fraud schemes. We can bring that knowledge back to the claims and underwriting folks to prevent schemes from happening all together.
IIR: How would you characterize what FRISS is trying to accomplish as a provider, and why it is becoming more important for the insurance industry?
JM: FRISS is trying to bring the concept of “safe digital transformation” to the P&C industry. As I alluded to before, the fraud discussion has typically focused on the bad guys. However, insurance is about helping people—good guys—in times of need. Automating insurance processes, including both underwriting, claims and SIU, enables that help, but it also creates exposures, for example to fraud schemes. What FRISS aims to do is use data, insights and intelligence to help insurers to automate safely, and to do that by helping them to distinguish more effectively between honesty and dishonesty. It’s important to have great workflows for detecting dishonesty, but the greater value proposition is in serving honesty.
IIR: Let’s talk a little more about how the Polonious acquisition affirms this direction or helps to fulfill this ambition.
JM: This acquisition adds a ton of value and expedites a lot of goals we have as part of our long-term vision. One of the reasons we went to North America in the first place was because we aspire to become the global standard. Polonious is a U.S.- and Australia-based company but they have customers all over the world. So, the acquisition is accelerating our growth, bringing us closer to that goal to become the global standard for honest insurance.
Polonious has a stellar reputation, and it brings over 40 customers to FRISS, including Tier Ones all the way down to small private investigation firms. Those customers deliver a lot of insights into fraud schemes, a lot of subject matter expertise that fuels our AI and significantly accelerates our end-to-end strategy.
Rick Shepherd, President, Polonious Systems.
IIR: The announcement about the acquisition talked about how Polonious would improve FRISS’s investigations capabilities worldwide, closing the loop by bringing in more data, fraud schemes and trends. Could you explain what you mean by “closing the loop”?
Rick Shepherd, CEO, Polonius: It’s about continuous improvement, because we’re feeding information into the solution, closing the loop and facilitating continuous learning. This happens not only in the institutional environment but also in the individual engines running for each customer.
JM: It’s not just about alerting the SIU [special investigation unit]—throwing it over the wall, so to speak—but having the case management system to monitor and understand the workflows, and to get feedback. The investigators in the SIU will comment on things like whether such a case should have been forwarded to them, if a case was hard to prove, or if a claim was withdrawn after they asked certain questions—basically insights on the gray areas of fraud. Then, the AI picks up on that and can make decisions as to whether more or fewer of such cases should be referred to SIU, or if further data is needed.
RS: It improves the customer experience in three ways and protects the brand of the insurer as well. One way it improves the customer experience is if a genuine claim does get thrown over the wall to the SIU, those are now siloed into a workflow. Most SIUs that don’t have a good case management system are running through those cases and sometimes the less suspicious ones get put on a back burner. The claim can only be paid out when an investigator identifies it as genuine, and this puts everyone in the SIU at risk of negligence. However, the Polonious system helps improve that substantially by increasing case throughput and making daily processes more efficient.
The second way is the triage process that’s created by experts in the case management system. Investigators identify whether they should accept or reject a case—and if they reject it, Polonious helps them to reject it immediately. That information goes directly back into the FRISS screening tool and once that happens, the AI generates a whole new learning experience for the tool. And then, at the end of the case, you have different ways of measuring the outcome. So, it evaluates how much was mitigated, how much fraud was detected if any, and whether it was partially or fully denied and under what conditions.
Lastly, Polonious helps with the communication portion of what an investigator is doing on a day-to-day basis, like being able to communicate directly back to claims adjusters in real time. Now, adjusters have the ability to understand what the investigator is doing and either of the two can alert the other by saying, “Hey, we need to stop this and expedite the payment.”