By James Burton, sr. director of product management, LexisNexis Risk Solutions, Insurance, UK and Ireland
Fraud takes on many guises in insurance. Ghost broking is a scourge, with victims losing on average £1950 in 2021 according to Which? Magazine. But insurance providers are also dealing with organised crash for cash scams, fake or exaggerated claims as well as application fraud when identifying fact from fiction becomes key. And it’s a growing problem given the link between economic hardship and insurance fraud rising. We only need to look back at the recession of 2008 to see how history could repeat itself. Indeed, according to one leading insurance provider, fake claims more than doubled in the last three months of 2021, with so-called “pre-inception losses” – where someone damages or loses an uninsured item, takes out a policy and lies about dates – were up 156pc on the previous quarter .
So how can insurance providers improve their resilience to fraud at the front end without impacting the honest customer who expects a streamlined, friction-free quote experience? This is particularly important right now as consumers examine every aspect of their outgoings to see where savings could be made – there should be no barriers to their ability to access products and pricing suited to their individual risk.
Insurance providers already hold vast amounts of customer data. Good identity management should start with ensuring that data is fully leveraged. Do we already know this individual?
Linking and matching technology enables all the data about a customer from marketing, applications, quotes and claims, to be consolidated into one ‘true record’, which is then assigned a unique identity. This means insurance providers can immediately understand if a new customer approaching for a quote is genuinely new or if they have had a relationship with the provider in some guise, in the past. This could be a valuable first step in helping to combat fraud but also in delivering a more streamlined quote process to a returning customer.
Once that golden record has been created, insurance providers can continue to build a picture of the individual through data enrichment, knowing that the basis for the risk assessment is accurate and up to date.
The fact remains however, that even the biggest insurance players have only around 15% of the market, so 85% of insurance buyers remain a mystery to them. Contributory data, where insurance providers share data on a reciprocal basis, helps to solve that problem by filling in pieces in the jigsaw when assessing risk from quote through to claim. This, combined with publicly available information sources allows the insurance provider to validate in real-time, the data provided by an insurance applicant to a much greater degree of accuracy than if they relied on their own data and public data sources alone.
Contributory data could include policy history to reveal whether the individual has cancelled a number of policies in the past or had gaps in cover, which may indicate a fraud. Market-wide quote data adds a further layer of understanding. Gathered over the past six years this data can flag where quotes may have been manipulated for a cheaper quote or indeed if a named driver has no obvious link to the main driver on a policy to help stop ghost brokers in their tracks. Highly granular historical claims data will soon bring a valuable new dimension to fraud risk identification while helping to ensure those individuals who have suffered claims in the past are supported with appropriate products in the future to help mitigate those risks.
Digital footprints associated with email addresses can also play a key role in helping to validate a person is who they claim to be, at speed, at point of quote and not linked to prior fraud. By using billions of transactions from global payment processors and other online industries, email intelligence-based fraud prevention tools can provide an instant risk score to indicate whether an ID is genuine or potentially fraudulent.
Ultimately, through the identity management and verification tools now available to the insurance market, largely based in insurance specific data, providers can improve their ability to spot the flags for fraud at the front end and throughout the customer journey without impacting the seamless experience honest customers deserve. With insurance fraud reported to have risen 27% for one insurance provider so far in 2022 , data is set to play a vital role in building the market’s resilience to both the organised and opportunistic fraudster.
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