Spotlight: Application fraud - Ghost busting – email intelligence can help combat insurance application fraud

The rising problem of insurance application fraud and ghost broking activity is putting the insurance market under significant pressure to improve the robustness of identity validation checks prior to and post policy inception. While application fraud is often the deliberate misstating of data (such as details of previous claims) in the application for a cheaper quote, the more serious concern is the use of stolen or fake identities to buy insurance to sell on to unsuspecting motorists.

The perennial challenge for the insurance market has been in delivering a streamlined, frictionless quote process to customers, while at the same time conducting thorough identity validation checks. Insurers have been using fraud risk scoring based on email address intelligence and other personal information provided during the application process to meet this challenge. The matching capabilities of the National SIRA database are also helping the market boost its resilience to application fraud without detriment to the customer experience.

Identity fraud related crime increased during the pandemic. Aviva has seen cases of application fraud and ghost broking grow over a third in 2020 and the number of ghost broking investigations has doubled since 2016, Stephen Dalton, head of intelligence and investigations at the Insurance Fraud Bureau, told Post earlier this year.

As the Detective Chief Inspector Edelle Michaels, Head of the City of London Police’s Insurance Fraud Enforcement Department, said in July 2021, following a week of action against insurance fraudsters: “This week of action has been a stark reminder of the immoral tactics that ‘ghost brokers’ use to defraud members of the public, including one man who used his family and friends to refer his illicit services to others. It has also reinforced the fact that not all ‘ghost brokers’ look or act the same.”

On the rise

Even before the pandemic, application fraud was on the rise. Data from The Association of British Insurers shows that in 2019, cases of insurance application fraud rose by more than 200% on the previous year, which equates to 760,000 cases of detected insurance application fraud, worth £1.45bn. The vast majority of reported cases of application fraud relate to private motor insurance, which in 2019 amounted to £1.39bn (see below).

In response to this rising threat, more tools are becoming available to help the insurance market ramp up its strategies to tackle ‘front end’ fraud, using identity validation checks to help confirm the applicant is who they say they are. Crucially, these tools enable checks to be conducted at speed, at point of quote and without unnecessary friction.

Instant email address validation at point of quote is a prime example. This is helping insurers spot potential cases of application fraud early in the customer on-boarding process. It’s an approach that is already working to tackle identity fraud in the banking sector, and now the benefits are being used in the insurance sector.

Insurance providers can now access an instant risk score as part of the risk assessment process. This score indicates whether the identity is genuine or whether it could be fraudulent – based on an individual’s email address and other personal information provided at the point of quote.

Email addresses are unique global identifiers that unlock digital engagement and transactions in every industry because they are one of the most commonly used components of an online transaction. 91% of people have had the same email address for three years or more and 51% for more than 10 years. As well as being a consistent identifier, an email address is also linked to multiple online accounts and transactions. This means each individual email address creates a digital footprint, which makes it one of the most powerful tools for detecting application fraud.

Risk scores can be assessed by evaluating email address metadata points, such as whether the email and domain even exist, or whether the email bears a close resemblance to the proposer’s name for the policy.

As well as automatically validating quotes, the risk score can be used to inform pricing and underwriting decisions alongside a wide range of data enrichment datasets. These include publicly available data, policy history data, property, environmental and prior claims data, all of which is fed directly into insurer and broker software systems from one access point.

A vital step

The National SIRA database offers a further vital step in fraud prevention. By providing a single point of entry to a wide range of risk data, the platform ensures ID validation checks become part and parcel of a swift risk assessment process.

Insurance providers match their customer data against the National SIRA database to flag potential fraudsters, prior to or post policy inception. The more data points that can be matched – the greater the match rate. This has led to the inclusion of email addresses and telephone numbers in the Point of Quote API call to National SIRA, to deliver improved match rates – helping insurance providers to identify fraudsters before they become customers.

The pandemic has not only expedited the insurance industry’s adoption of digital business, it has heightened the need for robust ID validation checks at the point of application, quote and post policy inception. These innovations are set to provide a boost to the insurance market’s resilience to identity fraud, protect unwitting motorists from the threat of ghost brokers and ensure a streamlined quote experience for the genuine end customer. 

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