3 strategies to fight insurance fraud and keep CX in focus
Digital transformation in the insurance industry is streamlining the onboarding and underwriting process, making it easier and faster for customers to get coverage. Mobile apps allow for anytime-anywhere access to policies and customer service, while self-service platforms enable policyholders to submit claims online. Though their digital practices are not as mature as in other financial sectors, insurers are embracing a digital future.
Close attention is being paid to customer experience (CX), with of insurance companies saying that improving CX is a key driver in their digital transformation efforts. 77% of insurance companies saying that improving CX is a key driver in their digital transformation efforts. Unfortunately, the drive for frictionless interactions makes it easier for identity theft and other fraud crimes to go undetected.
Fraud is a $300bn+ problem
The impact of insurance fraud is staggering. The Coalition Against Insurance Fraud (CAIF) estimates that fraud for all types of insurance costs $308.6bn annually, making it the second-largest economic crime in the United States after tax evasion. Fraud can occur at any time during the policy lifecycle: attackers use stolen or synthetic credentials to open fraudulent policies, take over existing accounts or issue illegitimate claims, often resulting in unrecoverable financial loss. Fraudsters also use insurance policies as a tool for money laundering because they offer a way to legitimize illegal funds and move them through the financial system undetected.
Insurance fraud doesn’t just hurt insurance companies. Fraudulent applications and claims deplete the funds paid in by honest customers to cover legitimate losses, driving up the cost of insurance premiums. In fact, the FBI estimates that insurance fraud costs the average U.S. family between $400 and $700 per year in increased premiums. For many consumers, increased premiums mean the difference between insurance coverage being a reality or not.
As insurers prepare for the risks and rewards of a digital future, there are three strategies insurance companies can follow to better manage fraud without compromising customer experience:
1. Take a multi-layered approach to identity verification
Digital identity verification is critical to stopping bad actors at the gate—at the point of application—before they can do damage down the road. Carriers must have a holistic perspective of customers, beyond identity matching, that includes additional layers of risk to ensure customers are who they claim to be.
Performing a high-level check to speed up the onboarding process or using a one-size-fits-all tool only makes it easier for fraudsters to avoid detection. Taking a multi-layered approach empowers carriers to close the gap on fraud and improve profitability. With more ways to verify customers, carriers can deliver the right verification experience at the right time to show real customers the fast lane and apply friction only as needed to suspicious or higher-risk customers.
2. Invest in advanced authentication to prevent account takeover
Account takeover fraud (ATO) is a growing concern for insurers. At a time when cybersecurity is a pressing issue for businesses, a study by Datos Insights found that insurance-related ID fraud has impacted close to 30% of Americans, with younger generations more disproportionally affected by fraud.
Issuing a fraudulent life insurance policy is a major risk for carriers, but protecting against fraud doesn’t stop after a customer is successfully onboarded. Sudden account changes, such as a change in email address, mailing address or phone number, can be signs that a fraudster is attempting to take control of the account ahead of a retirement withdrawal, annuity payment or fraudulent claim. Advanced knowledge-based authentication (KBA), multi-factor authentication (MFA) or online document authentication of a government-issued photo ID, can significantly reduce fraud losses—and time spent chasing down identity thieves—without needlessly inconveniencing customers.
3. Amplify and diversify fraud intelligence data
Effectively fighting fraud is a group effort. First-party databases provide only a limited view of novel fraud attacks, exposing carriers to critical blind spots. Powered by supervised machine learning technology to analyze identity attributes at scale, consortiums provide participating companies visibility into fraud patterns that can improve fraud prevention. By joining forces, insurers are better positioned to proactively strengthen their fraud defenses and safeguard revenue.
For today’s insurers the need to verify an identity is a top priority, not only during onboarding and claims distribution, but whenever and wherever accounts are accessed. With the right digital identity verification solution, insurers can fight application fraud and prevent account takeovers—and still deliver exceptional experiences that build brand trust and loyalty.
Read GBG’s Global State of Digital Identity 2023 report to learn more about the importance of protecting customers’ digital identity and preventing fraud.