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Blog: Insurance fraud trends to look out for in 2020


Protecting customers online is becoming increasingly difficult. Brooke Snelling, senior manager at Iovation, a Transunion company, highlights areas where insurers should be using tools to prevent fraud.

 Brooke Snelling, Iovation
Brooke Snelling, senior manager at Iovation, a Transunion company

Insurance is built on trust. Disasters strike and accidents occur, and your policyholders trust you to protect them and their beneficiaries should the unthinkable happen.

When it comes to online insurance, maintaining that trust requires secure, easy access for every interaction. Too much friction at any touchpoint will compel customers to click over to a competitor that offers a smoother experience.

Unfortunately, protecting customers online has become increasingly difficult due to a steady increase in online fraud. Iovation found that out of 10 billion global online transactions from September 2018 to September 2019, 9.14% were risky in the insurance industry compared to 5.09% across all industries.

The insurance industry has a fraud problem, and the challenges are widespread as highlighted by Iovation data. The following types of fraud are worth noting as 2020 starts: point of application, premium write-off, ghost broking, account takeover, point of claim and contact centre.   

Point of Application
Application fraud may involve fraudsters applying for insurance using someone else’s personal information, fictitious details or a mix of the two. They may also alter and falsify application information to reduce their premiums, such as a rate evasion scheme in which the policyholder misrepresents the number of miles they drive or records a false garaging address. Stopping fraudulent applications before the onset can save insurance companies money they would otherwise lose to fraud and cut down on resources spent on internal investigations to curb fraud. Attempted online first-party application fraud – when a person falsely applies for an insurance policy – is up 516% from 2015 to 2018.

Premium Write-Off
When a policy is issued but not funded due to lack of payment from a bad check or stolen credit card, insurance carriers still have to cover liabilities for that initial period of time. Premium write-offs result in free insurance coverage since carriers cover policies during the premium latency period. Data shows loan default – or a lapse in premium payments on an insurance policy – accounted for 5% of fraud in the insurance industry (September 2018 to September 2019). The use of false credit cards accounted for 3% of insurance fraud during this period.

Ghost Broking
Acting as self-appointed intermediaries between insurers and consumers, ghost brokers purchase insurance with false details, sell the policies and then cancel them after they have been resold. Or, the ghost broker might create false documents that look like they are from a legitimate insurance carrier. In either case, the unsuspecting victims who believe they purchased insurance policies are instead left with a useless policy, liability and financial exposure. Online third-party application fraud – when a person falsely claims to be a broker applying for another person’s insurance policy – is up 139% from 2015 to 2018.

Account Takeover
With accounts increasingly being accessed and managed online, insurance policies are at higher risk of account takeover. When someone (other than the insured) accesses a policy, they can obtain sensitive information, modify coverage and dishonestly route an upcoming claims payment to themselves. From motor to life insurance policies, this type of scam is detrimental to the customer experience and costly for the insurer.

Point of Claim
From crash for cash to exaggerated claim valuations, the impact of claims fraud is costly, especially for motor insurers. Attempted online first-party claims fraud – when a person submits a fictitious or exaggerated insurance claim – is up 271% from 2015 to 2018. Attempted online third-party claims fraud – when a person falsely claims to be a broker applying for a fictitious or exaggerated insurance claim – is up 63% during that period.

Contact Center
As online fraud prevention advances, fraudsters switch to the contact center to avoid detection. First they gather data about policyholders by mining social media or the dark web. Then, using high-pressure tactics with spoofing technology to socially engineer agents, they take over policyholders’ accounts or apply for new policies.

In the digital age of insurance, it is imperative that carriers leverage all available tools to prevent fraud, and keep costs down for both themselves and consumers. By establishing strong fraud detection and authentication solutions, insurance carriers can reaffirm that trust and give their policyholders the protection they desire. The start of the new decade is the right time to assess how to best establish consumer trust.

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