November 13, 2018
Accelerating Policy Processing While Bolstering Insurance Fraud Prevention
Posted April 25, 2017
Established insurers and insuretech startups have adopted technologies to offer instant policy quotes and rapid claims processing in an effort to attract and retain today’s digital consumer.
However, the same technologies that make it faster and easier to sign up for insurance or submit a claim make it shockingly easy for fraudsters and organized fraud rings to commit cyberfraud.
Today, one in 10 account creations is fraudulent — up 35 percent since 2015. And fraud now accounts for 3 percent to 5 percent of all claims in the U.S. In property and casualty (P&C), that figure is 10 percent or more. The cost to insurers is an estimated $250 billion per year lost to fraud, which in turn, forces premium increases that can seriously hamper an incumbent’s competitiveness or sink an insurtech startup.
Unfortunately, fraudsters have a veritable buffet of resources at their disposal, thanks to the 5 billion personal files compromised through data breaches in recent years. Everything from stolen user IDs, passwords, names, addresses, Social Security numbers, credit card numbers and medical records are widely available on the dark web
With this information, fraudsters can receive medical care on someone else’s dime or file false auto claims. In the case of ghost brokers, they can even sign other people up for policies without their knowledge to score commissions.
Eliminating cybercriminals while serving prospects and customers can be tough when you’re moving at the speed of now. But insurers large and small are discovering this balance between fraud and friction may actually be a false dichotomy.
The Fast and the Fraud-less
It turns out the same technologies insurers are leveraging to accelerate processes can also be used to safeguard against fraud.
The key, according to UK-based insurer One Call, is using authentication technologies that leverage shared global threat intelligence.
By assessing tens of millions of daily transactions spanning multiple industries, One Call is able to establish each user’s unique “digital identity” or the real-time sum of the almost infinite connections users make as they transact online across web, mobile and more.
Digital identity is based on information — not static information, but dynamic information. It’s a dynamic assessment of the trust level associated with that identity and its device, based on every transaction it makes in the digital world, and any risks that may be associated with it.
Using this kind of technology, One Call and other insurers say they’re able to instantly recognize good customers and prospects with 95 percent accuracy, accelerating and enhancing the experience for legitimate transactions, while stopping fraudsters in their tracks.
It’s All About the Data
Incumbents and insuretechs can also use this data to streamline processes and reduce costs.
“Not far into the future, the power of [big] data will mean that people who look the same [to an insurer] now will no longer look the same,” Andrew Brem, chief digital officer at auto insurer Aviva, told the Financial Times.
For example, Aviva has found it can streamline auto insurance applications by doing away with questions about the make of car, location and accident history. Instead, a statistical link between the purchase of life insurance policies and safe driving means life insurance policyholders can be given lower quotes.
What’s more, automation that speeds up claims processes can reduce the cost as much as 30 percent, according to McKinsey & Company.
“The digital bar for insurers is high and rising,” the firm noted, recommending that insurers should leverage technologies, such as mobile, social and cloud, to make better decisions, automate processes, deepen their connection with customers, employees and intermediaries, and pursue profitable innovation.”
For P&C and life insurers, 30 percent to 40 percent of expenses are locked up in their top 20 to 30 core end-to-end processes — costs that automation could reduce or eliminate.
So, it turns out that insurance companies trying to provide customers with everything they want can actually have it all themselves — provide an instant, frictionless experience while still fighting fraud and reducing costs.