As insurers drive consumers online and to mobile apps to service their insurance needs, the likelihood that fraud will seep into their books will inevitably increase. Tristan Prince explains how to shut potential fraud out at the front door.
Rising consumer demand for instant gratification and self-service options is creating a void for many insurers and brokers that, if left unaddressed, will be felt most heavily when it comes to claims and, ultimately, loss ratios.
Insurers Offering Comprehensive Services Online
One of the most significant developments is that insurers expanding online services to give consumers the ability to initiate a quote, incept a policy, obtain insurance documents, register claims, make mid-term adjustments, and download custom apps. Consumers can literally do it all online, often without ever speaking to a broker or insurance representative. With all these different touch points now part of the customer experience, there are far more opportunities for cyber criminals to commit fraud.
The insurance industry is no stranger to online fraud, whether it’s being directed at insurers or the consumers they serve. Sadly, it has become a significant problem for businesses across the entire insurance landscape.
At iovation, we have a unique view of the landscape when it comes to insurance fraud. We continuously collect, maintain and grow a robust network of granular device intelligence from hundreds of insurance fraud analysts around the world, and then use this data to protect our clients from insurance fraud.
Iovation Claims Fraud Statistics
Here are a few telling statistics on insurance fraud in the UK, drawn from iovation’s Global Device Intelligence Platform:
· In the last 6 months alone, iovation’s insurance subscribers shared 232,712 unique pieces of insurance fraud related evidence at device level to help each other prevent claims and application fraud.
· More than 90,000 transactions have received a decline response, due to significant device risk, for iovation insurance subscribers in the UK since January 2016.
· Since January 2016, over 34% of the total declines for our insurance clients have been as a result of shared evidence and intelligence placed on high-risk devices
Emerging Fraud Trends
While the extent of fraud losses in the insurance industry remain somewhat murky, the fraud trends insurance companies are facing and the signs of growing fraud activity, are becoming quite clear. Here are just a few of them.
Rise of the Aggregators
The proliferation of insurance aggregators is perhaps one of the biggest insurance trends. With aggregator sites such as GoCompare.com, consumers can submit their information (or application) just once and receive quotes from numerous providers. This saves consumers time and money, and gives them a better experience.
Still, this also introduces some tough challenges:
to obtain a better quote, such as a false address, claims history etc.
Applicants are able to request 100-200 quotes in a short amount of time with slight changes, such as the risk address, mileage, value of goods for example being hid from the insurer
Fraudsters can operate from any region, and can easily change their tactics to evade detection if no verification is in place.
Proliferation of Ghost Brokers
Ghost brokers, commonly referred to as “street” brokers, falsely represent themselves as an employee of an insurance company who has special access to consumer discounts, and often advertise online via social media and industry-specific communities.
Acting as self-appointed intermediaries between insurers and consumers, ghost brokers will often use bots to find the “right answers” to insurers’ application questions by filing 100-200 applications, all with slightly modified answers. Of the results, the ghost brokers will serve up the lowest priced policy to the consumer, charge them for the policy, deliver the consumers ‘’legitimate” policy documents, and then –without the consumer’s knowledge – cancel the policy and pocket the refund!
Device Intelligence and the Future of Fraud Defense
As these trends play themselves out in the critical months ahead, insurers will need to take deliberate steps to craft and implement a comprehensive customer authentication and fraud prevention strategy that helps them combat new forms of fraud and meet increasing consumer expectations for convenience.
Using powerful device intelligence, insurers are now able to mitigate fraud risk at all stages of the policy lifecycle and prevent loss at key transaction points including:
At quote and policy inception – Before any loss can be incurred
At MTA – When a new risk might be introduced
At a claim – As an extra layer of identity verification
During renewal – To minimize future exposure.
Both insurers and aggregators are using device intelligence to stop fraudulent applications from entering into their review queues, effectively shutting them out at the front door. As more and more insurance organisations contribute and share data about known-bad devices, the new shared information serves to benefit them all.
Tristan Prince is Business Development Manager, UK & Europe at iovation.