The insurance industry has experienced record-breaking fraud attempts since the pandemic’s onset, significantly outpacing other sectors during the same period. Consequently, insurance carriers have reached a pivot point when it comes to fraud detection and prevention.
According to IDology’s Eighth Annual Fraud Report, 75% of insurance companies report increases in fraud attempts, nearly 10 percentage points higher than the next sector. The repercussions have been swift and severe. The Coalition Against Insurance Fraud’s most recent assessment found that insurance fraud costs people $80 billion annually, increasing annual premiums for the average family by up to $700.
Several factors contributed to this increase, including enhanced phishing attacks, mass work-from-home deployments, decentralized fraud teams and nation-state attacks. While insurance fraud is a crime, the perpetrators are intelligent and well-organized. They know how to exploit the industry’s vulnerabilities for financial gain, and they capitalized on this unique moment to commit fraud at an alarming rate.
At the same time, broad industry trends, including customer desire for self-service onboarding, extensive personal identifiable information (PII) exposure from data breaches and authentication infrastructure gaps, made it easier for threat actors to commit insurance fraud.
In response, insurance carriers must enhance fraud detection and prevention measures, ensuring they can protect platforms and customers from constantly shifting fraud trends. Let’s look at three ways every company can strike a balance between fraud prevention and customer experience.
#1 Verify Customer Identities Without Collecting Excessive Data
After years of astonishing data breaches and personal information misuse by digital platforms, many consumers are rightly wary of handing over their information. As a result, two-thirds of Americans report they are extremely or very concerned about cybersecurity, data breaches and ransomware attacks.
Similarly, 70% believe that businesses obtain their personal information without consent, and 90% want new federal laws that protect their data online.
Of course, this puts insurance carriers in a difficult position. With threat actors opening unauthorized accounts and defrauding insurance providers, implementing identity verification and Know Your Customer (KYC) protocols is a natural solution.
However, nearly half of Americans will abandon enrollment if the process is overly onerous or companies ask for too much information. Today’s consumers are vigorously guarding their Social Security and driver’s license numbers, dates of birth and home addresses, making it especially challenging to balance fraud deterrence and customer expectations.
That’s why insurance carriers must develop the capacity to verify customer identities without collecting excessive data by analyzing readily available but less invasive data, such as IP addresses, phone numbers and email addresses. With the right solution in place, insurers can effectively analyze this information to verify identities and reduce fraud without impeding customer experience.
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#2 Implement Customized Identity Verification Protocols
Today’s consumers are unapologetically self-sufficient and digital-first. For instance, nearly 70% of consumers would rather self-serve than speak with a customer service representative.
To empower self-enrollment and self-service functionality without compromising identity verification protocols, insurance carriers must implement customized workflows that support customer preferences while continuing to thwart fraud attempts. This includes solutions that minimize data collection but also requires the industry to develop protocols for prequalification that streamline the application process while preventing unauthorized account openings or other fraud efforts.
This can be achieved with a solution that optimizes identify verification workflows without encroaching on customers' desire to be self-sufficient.
#3 Adapt to the Latest Trends
Fraud trends changed significantly during the pandemic, introducing new risks while mitigating others. Threat actors took advantage of the peculiarities of pandemic life to enhance their fraud efforts, and their tactics will continue to change in the days ahead.
The insurance sector can’t afford to remain stagnant in the face of evolving threat patterns.
Notably, insurance carriers should pay close attention to fraud attempts targeting mobile technologies. While mobile apps and digital communications are prerequisites for doing business, they also introduce fraud prevention challenges, requiring insurance carriers to implement identity verification and fraud detection solutions across all device types and platforms.
Deterring Fraud Is Part of the Customer Experience
Insurance fraud increased significantly in recent years, representing a turning point for insurance carriers and their customers.
Security and customer satisfaction are inextricably linked. Now is the perfect time to enhance the customer experience with identity verification solutions and processes that keep customers safe and criminals unsuccessful.