Take these steps to safeguard against insurance fraud in 2022
Insurance fraud perpetrators are often intelligent, well-organized criminals who capitalize on carrier weaknesses.
Insurance fraud takes on many forms, but the costs are unified and predictable.
Insurance fraud collectively costs consumers $80 billion annually and increases premiums for the average family by up to $700 each year.
Insurance fraud perpetrators are often intelligent, well-organized criminals with experience exploiting the industry’s vulnerabilities for financial gain. Most notably, they capitalize on a carrier’s inability to assess an applicant’s authenticity. Coupled with macro industry trends, such as increased self-service onboarding, customer PII exposure from data breaches and infrastructure gaps when authenticating customers, it’s easier than ever for threat actors to perpetrate insurance fraud predicated on identity crimes.
Further complicating the landscape is growing consumer concern about data privacy and identity verification. IDology’s Annual Consumer Digital Identity Study found that two-thirds of Americans are extremely or very uneasy about security breaches and ransomware attacks and yet, fewer than half believe they have the knowledge and tools to protect themselves.
Therefore, carriers are faced with making strategic decisions and deployments on digital identity verification as the first layer of onboarding customers and servicing ongoing clients.
Carriers looking to enhance fraud protection should considering these best practices:
No. 1: Streamline onboarding without compromising security.
While KYC and other identity verification processes help detect and deter identity fraud, insurance carriers must balance consumer demand with operational realities.
Consumers today chaff at onboarding friction, and many will abandon their account creation if they feel the process is too demanding or invasive. For instance, 48% of Americans abandoned applying for a new online account because the process was untrustworthy or took too long. In other words, consumers dislike too many authentication steps but place a premium on security. In fact, 82 percent of consumers think identity verification is extremely or very important, requiring insurance providers to thread a delicate needle throughout the onboarding process.
In response, insurers must develop the capacity to evaluate risk and perform identity verification with minimal consumer information. Insurers can achieve this complicated objective by utilizing the deluge of readily available, but less controversial, data such as IP addresses, phone numbers and email addresses.
By harnessing solutions that rely on emerging technologies such as machine learning, insurance carriers can effectively analyze this information to quickly and easily verify customer identities and reduce instances of fraud.
No. 2: Develop customized identity verification protocols.
The insurance sector is increasingly digital-first, with many carriers implementing self-enrollment and self-service functionality to support consumer preferences. Nearly 70% of consumers indicate that they would rather self-serve than speak with a company representative, so it’s a trend that insurers can’t afford to ignore.
However, as online operations grow in scale and complexity, insurers need to develop customized identity verification protocols to help thwart fraud attempts. This undoubtedly includes implementing solutions that minimize data collection, but also adopting new protocols for prequalification and streamlined application processes.
No. 3: Evolve with the times.
The ongoing pandemic has reoriented the fraud landscape, accelerating some fraud efforts while minimizing others. As insurers enhance identity verification protocols for a pandemic-altered operational reality, they must remain agile, ready to evolve as threat patterns change.
Most importantly, insurance carriers should be prepared to assess emerging fraud concerns associated with mobile platforms. Today’s consumers are digital-first and mobile-centric, making apps and mobile accessibility prerequisites for competitive organizations. As mobile devices continue to be a top target for fraudsters, insurance providers must prioritize identity verification and fraud deterrence across all devices.
What’s more, insurance carriers should continue monitoring shifting regulatory standards that could require them to justify data collection policies more transparently.
Insurance fraud is pervasive and costly. Advanced identity verification best practices are critical to preventing threat actors from perpetrating fraud for financial gain. The time is right for carriers to take a closer look at identity verification solutions that reduce fraud without inundating consumers with friction-heavy practices that do more harm than good.
Christina Luttrell (cluttrell@idology.com) is the chief executive officer for GBG Americas, comprised of Acuant and IDology, the premier identity verification, regulatory compliance and fraud prevention provider for all industries to establish trusted digital identities.
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