Carriers saw more identity fraud as digital activity spiked
Purely digital transactions and the growing availability of personal data for sale is driving this trend, LexisNexis reported.
Since the onset of the pandemic, insurance carriers have seen an uptick in consumers’ digital activities across both underwriting and claims. Nearly 70% of carriers said this increase in digital activity was accompanied by growth in identity fraud, according to a survey by LexisNexis Risk Solutions and Aite-Novarica Group.
The most common points of entry for identity fraud among property and casualty insurance carriers are underwriting or the point of application, customer service or at the point of account and claims at the point of payment, according to the survey.
The study underscored the importance of evaluating fraud strategies and capabilities across underwriting, customer service and claims as the insurance industry continues its digital transformation, according to LexisNexis.
“Our experience tells us the largest drivers of identity fraud for insurance are a combination of purely digital transactions and the increased availability of consumer data whether on the dark web, social media or online consumer portals across all industries,” Kim Brown, director, insurance identity access management solutions for LexisNexis Risk Solutions, said in a release. “Even as consumers opt for digital interactions, they still expect their policies, accounts and transactions to be protected against fraud.”
She noted some carriers expect digital activities to continue to grow in the coming 12 months, furthering the need to invest in advanced identity verification and fraud mitigation, which can help carriers identify and flag discrepancies proactively, while genuine claims can be fast-tracked.
The need for a multipronged approach to fraud
A multilayered approach is critical to ensuring accurate identification and prevention of fraud, according to Michael Trilli, insurance practice leader for Aite-Novarica Group.
“For carriers evaluating their current fraud strategies, I recommend looking for ways to merge data from multiple sources, combining fraud solutions to validate identity verification, and adopting processes to authenticate and escalate all potential security risks,” Trilli said in a release.
Currently, 74% of carriers are using multifactor authentication, according to LexisNexis. Additionally, 70% are using one-time passwords, a particularly popular tool among small commercial carriers because of its high efficiency. Further, 67% of carriers use password-free authentication, which is the top solution for reducing underwriting and claims fraud.
To stay ahead of the evolving fraud threat, the report suggests carriers:
- Recognize the evolving digital activity in the insurance ecosystem, from carrier to consumer, is the new normal. Plan to grow alongside it.
- Don’t overlook the current increase in fraud. Address the issue because it impacts claims costs, strains operations or taints customer relationships.
- Install more advanced fraud prevention tools to close the capability gap.
- Adopt a multilayered approach featuring a range of tools. No single technology will adequately detect and prevent every type of fraud.
- Spread investments across functional areas to protect consumers throughout the policy lifecycle.
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