Tag Archives: biometric

How IOT Will Change Claims Process

The idea of risk-sharing began 5,000 years ago when Chinese merchants combined their cargo on multiple ships. Now, this dinosaur industry is being pushed into the modern era with the help of the Internet of Things (IOT). This technology has the power to transform insurance, but it comes with its own challenges.

The traditional insurance claims process has stayed the same for decades, and it doesn’t sit well with customers. According to an Accenture Strategy Report, customer churn because of declining loyalty and poor customer experience represents as much as $470 billion in life and property and casualty premiums. The growth of the IOT has disrupted the industry and forced companies to change how they process claims.

Customers use technology in their everyday lives and expect companies to do so, as well. Just 15% of customers say they are satisfied with their insurer’s digital experience. In today’s fast-paced world, customers want results right away. Insurance claims that take weeks or months to process can be a serious source of frustration.

See also: Welcome to New IoT: ‘Insurance of Things’ 

However, the IOT allows insurers to move more quickly and make powerful data-driven decisions. Companies no longer have to wade through paperwork and can instead move through the claims process more efficiently. Instead of filling out countless forms, customers can now submit claims via mobile apps by taking a few pictures. Connected devices like biometric and environmental sensors make it easy to calculate risk and adjust policies as situations change.

Data from connected devices allows insurers to know their customers on a deeper level with more accurate personal information, which can help create powerful bonds and add an element of customization to insurance that has long been lacking. Insurers can also more easily detect fraud, recommend personalized products and create more accurate estimates. In an analog world, an insurer didn’t know when a customer put a house on the market. In a digital world, insurers can know of available homes right away and recommend a new home insurance policy, plus auto and life insurance coverage.

Aside from improving the customer experience, using the IOT also helps insurers cut costs. Automation can cut the cost of the claims process by as much as 30%. In many cases, those savings can be passed on to customers. IOT-connected devices have helped some insurance companies lower their premiums by as much as 25%.

Most insurers believe that connected devices and more data will prevent greater losses, which could decrease the number of claims and lower insurance prices for customers who have reduced risks. In health insurance, data from devices can monitor a person’s health and recommend products and policies based on that data. Many companies are already offering discounts to customers who link their devices to their insurance coverage due to the likelihood of lower risks.

However, the growth of IOT in insurance isn’t without challenges. Consider the example of a Danish woman who had been receiving insurance payouts to cover her inability to work due to an injury. Her profile on a running app told a different story—she was actually much more active than she claimed and regularly participated in sporting events that would have been near impossible if she really was an injured as she claimed to be. The woman’s insurance payments were cut in half, but questions arose about the rights of an insurance company to use data from IOT devices. Similar cases are popping up around the world of private customer information being shared online and companies using that information against their customers. Insurers need to be transparent and communicate their terms and conditions to their customers.

See also: Global Trend Map No. 7: Internet of Things  

Most insurers know the importance of striking when the iron is hot and adopting new data-rich practices before they become commonplace and don’t yield a competitive advantage. However, the IOT shift is so great that it can be overwhelming for companies to know where to start to get the best results.

Aside from the growing pains, most insurers agree that the IOT will revolutionize the industry and customer experience. In an industry as regulated as insurance, taking advantage of new IOT technology is one way companies can stand out and offer a forward-thinking approach to their customers. It’s definitely time for change in insurance, and that change is coming through the IOT.

Fighting Fraud With Multifactor ID

Insurance companies, like many other businesses, are extremely concerned – and rightly so – about cyberattacks that could result in the theft of the personal information of customers and employees. To protect themselves against data breaches and other threats, they companies are implementing physical and network security controls that include both the latest technology-based solutions and security awareness training for employees, who are all too often the weak link.

But while these security measures are certainly necessary, they are not enough, because insurance companies also face a second type of risk: the risk that criminals who have gained access to customer information from other sources will use it to hijack accounts.

Most account takeovers occur via social engineering, where fraudsters use hacked customer data they have purchased on the dark web or information they have gleaned from social media to impersonate legitimate customers and trick call agents into making account changes. To prevent this type of fraud, insurers need more robust customer authentication processes.

Many insurance companies continue to rely on so-called knowledge-based authentication (KBA) to grant access to accounts, meaning that customers verify their identity by demonstrating knowledge of personal information such as their account number, date of birth, mother’s maiden name and so on. But any business that protects financial assets by authenticating customers in this way is vulnerable to fraud because, thanks to data breaches, criminals have easy access to that information. And the rise of social media means that even the answers to common challenge questions (for example, “What was the name of your first pet?” or “Where
did you attend elementary school?”), are often readily available to skilled and patient fraudsters.

See also: Draining the Swamp of Insurance Fraud  

The proliferation of customer information on the dark web and on social media means that insurance companies need to rethink how much, if at all, they will rely on customers’ knowledge of personal information to verify their identities. Because criminals have such easy access to customer data, insurers need to implement more reliable ways to identify their customers, whether the contact is via the web, a mobile app or phone.

So how can insurance companies make sure that a person logging in to change account details or calling customer service to initiate a claim is a legitimate customer?

Multifactor authentication is a best practice that adds an extra layer of security to the identity verification process. This approach requires that knowledge (something the user knows, such as a Social Security number or account number) be combined with inherence (something the user is, such as a voice print or retina scan) or ownership (something the user has, such as a trusted phone or a driver’s license). ATM access is a good example of a type of transaction requiring multifactor authentication: Bank customers must use both a physical debit card and a PIN.

For increased security, insurers should apply this same principle to their customer authentication processes. Apps and websites, for instance, should not grant account access based simply on user IDs and passwords – both pieces of information that can be hacked. A wide variety of more secure authentication methods are available, and many of them, such as dynamic PIN code generators and one-time password lists, are not particularly costly or complicated to implement.

Compared with online access, the phone channel continues to lag when it comes to security. Identity interrogation is still the dominant means of authentication used by customer call centers, and this obviously poses a significant risk in the age of increasingly sophisticated fraudsters who are adept at social engineering.

Fortunately, new tools are emerging that make reliable multifactor authentication possible. One approach is to use the caller’s phone as a physical ownership-based authentication token. With this method, a network forensics system analyzes the phone call within the global telephone network and verifies that the customer is calling the call center from his or her personal phone. The process is virtually invisible to callers (it requires no action or enrollment) and allows callers to be automatically authenticated before their calls are even answered. With this technology, the only way a fraudster could spoof a call would be to physically steal and unlock the customer’s mobile phone or break into the home to use a landline. These are not easy tasks to accomplish.

Multifactor authentication can also use biometrics – voice prints, specifically, in the case of phone calls. Voice-biometric systems compare a caller’s voice with a previously enrolled recording of the account holder’s to make an authentication decision. Biometric voice authentication will be one of the ways callers are authenticated in the future, but today there remain several sizable roadblocks to widespread adoption. Most notably, it is a lengthy task for contact centers to gain the permission and initial recording from their entire base of members.

Remaining stagnant and continuing use of single-factor authentication based on KBA may seem simpler in the moment, but the risks – not only losses to fraud, but also potential penalties from regulators and lawsuits from affected customers – greatly outweigh the short-term discomforts associated with technology change, which will ultimately bring with it reduced costs and complexity.

See also: Global Trend Map No. 11: Fraud  

Consumers are living more and more of their lives online, and they clearly value the convenience and connectedness of the digital world. However, the steady stream of headlines about data breaches in every industry, as well as social media companies’ improper handling of personal information, is rapidly eroding trust. Many consumers have little confidence that their information will not be hacked and fall into the hands of criminals. If insurance companies wish to retain customer trust, they must take information security seriously and implement multifactor authentication.

The good news is that many of the new authentication technologies are not only more accurate than identity interrogation but also result in a better immediate customer experience. Customers who call their insurance company are often already stressed, and they just want to resolve their problem without having to jump through hoops. Reducing reliance on identity interrogation also reduces operating costs as agents can spend more time helping customers
instead of grilling them about their identity. Selecting the right authentication technology can thus be a win-win that results in more satisfied customers and decreased costs.

How to Calculate Return on Wellness

In the era in which wellness vendors were still claiming a return on investment (ROI_ on wellness (and more and more are not), I asked a number of them how they calculated the ROI. Not one calculated the ROI in a way that a steely-eyed CFO would endorse.

Below is a partial list of costs that wellness vendors should be considering, but rarely if ever do consider. If you have a wellness program and want to look for an ROI, make sure these costs are included:

1. Wellness vendor fees
2. Communication costs
3. Investments in materials (e.g., Fitbit) and facilities (e.g., onsite fitness centers)
4. The cost of biometric tests and health assessments
5. The cost of program incentives (awards, premium reductions, etc.)
6. The wages and benefits of the company’s wellness team members
7. The wages and lost productivity for employees to sit through biometric tests and wellness meetings, to read wellness memos and other communications and to fill out health risk assessments. (If 10,000 employees spend eight hours per year in wellness meetings, reading wellness emails, filling out forms, etc, at an average wage of $20/hour, the cost is $1.6 million.)
8. The cost of following-up on false positives from asymptomatic employees going to doctors for ill-advised tests. This one is not uncommon. (I’ve personally witnessed people who’ve had false positives on wellness exams and spent thousands of plan dollars just to explore false positives. The largest one cost a shade less than $70,000 to get an all clear. If you want to know the true cost of a wellness program, this impact can’t be ignored.)

Further, wellness vendors claim improvements in productivity, but most say the gains cannot be measured. That is a fallacy. Vendors need only look at a client’s wages as a percentage of sales (with a few minor adjustments). If that ratio is not declining, employee productivity is not improving.

For an excellent discussion on failures of wellness productivity claims click here.

The same principles apply to value on investment (VOI) claims, as well. Click here for an excellent review of what some call the VOI scam.

This post may be flogging a dead horse. So be it.

Biometrics and Fraud Prevention: Seeing Eye to Eye

As more consumers opt for the flexibility of serving themselves, it has become essential for businesses to deploy strong systems to authenticate identity. The challenge is how to reduce fraud without frustrating consumers or compromising the customer experience.

Biometric technology has been seen increasingly as a solution in industries such as financial services, but is there a useful place in insurance? As technology becomes more convenient –and more secure — many are saying yes.

What’s What in Biometrics

By identifying individuals through their unique physiological or behavioral patterns, biometrics offers a higher level of security, ensuring that only authorized persons have access to sensitive data. Physiological biometrics include fingerprint, face, iris and hand geometry recognition. Behavioral biometrics identify signature and voice verification, including keystroke kinetics that identify a person’s typing habits.

As consumer-centric channels such as mobile and online applications continue to expand, so will the risk of fraud. And while many industries, including insurance, continue to deploy new technologies to stave off attacks, the reality is that the tools and methods by which professional fraudsters operate are becoming increasingly sophisticated.

“While insurers have applied some preventive measures against fraud, the industry as a whole needs to catch up,” says Steve Cook, director of business development, Facebanx. “They must be forward-thinking and recognize the benefits of biometric technology and how it can help in preventing fraudulent activities.”

Reducing Claim Fraud and Protecting Data

One area where biometrics has begun to take hold is healthcare insurance. A study by the Ponemon Institute found nearly 1.5 million Americans to be victims of medical identity theft. Healthcare fraud is estimated to cost between $70 billion and $255 billion a year, accounting for as much as 10% of total U.S. healthcare costs.

Many insurers are using biometrics to help reduce billing fraud by eliminating the sharing of medical insurance cards between patients, or by making it more difficult for a person to assume another’s identity. For example, as an alternative to paper insurance cards, a biometric iris scan can immediately transport proof of a patient’s physical presence at a healthcare facility.

Biometric technology is also assisting healthcare insurers with compliance and data integrity standards — in particular with those set by the Health Insurance Portability and Accountability Act (HIPAA). For example, in addition to adhering to requirements for automatic logoff and user identification, insurers must implement additional safeguards that include PINs, passwords and some method of biometrics.

Fraud Capabilities in Property and Casualty

According to a report by Aite Group, the war against fraud in property and casualty insurance is also escalating. The group estimates that claim fraud in the U.S. P&C industry alone cost carriers $64 billion in 2012 and will reach $80 billion by 2015. Customer contact centers have been hit particularly hard. While the focus on protecting consumer data has primarily centered on online channels, fraudsters are now targeting the phone channel, as well. Leveraging information obtained through social media networks, thieves are manipulating call center representatives and gathering customer information. 

For this reason, biometrics are being deployed. Representatives can cross-reference incoming calls against a watch list of known fraudsters, identifying unique voice prints. Advanced biometric techniques can also identify fraud patterns based on speech analytics, talk patterns and various “red flag” interactions.


The insurance industry is just beginning to scratch the surface when it comes to identifying areas of fraud management to which biometric science can be applied. 

“Insurance companies [that] are first to adopt this kind of technology will push the fraudsters over to the competition, because fraudsters don’t want their face or voice on a database that they can’t control,” Cook says.

Making the switch to biometric security measures can mean a substantial investment if done on a large scale. Even so, with the proliferation of online channels, consumer conveniences and ever-shifting tactics of fraudsters, deploying some degree of biometric technology will become a competitive necessity. And, as long as the insurance industry continues to expand consumer services because of e-commerce and m-commerce, no doubt new applications of biometrics will come about.