February 16, 2018
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Posted February 23, 2017
What would Barton Keyes think of insurance fraud prevention in the digital age?
In the 1944 film noir classic “Double Indemnity,” Keyes, a brilliant claims adjuster played by screen legend Edward G. Robinson, ferrets out a life insurance scam perpetrated by an adulteress and her lover, who happens to be Keyes’s protégé.
The information on the policy checks out. The accidental death claim seems legit. But details beyond the claim—uncharacteristic behavior and unusual interactions between the villains and others near the “accident scene” lead Keyes to suspect and eventually expose foul play.
In a way, the movie perfectly encapsulates the challenges of detecting and preventing insurance fraud in 2017.
Disruption in 3-Seconds or Less
Keyes couldn’t possibly recognize today’s insurance industry, or understand the digital transformation it’s currently undergoing.
In January, insurtech startup Lemonade announced its automation systems had set a new world record for paying a claim in under 3-seconds—with zero paperwork.
Throughout the industry, a new wave of technology-enabled process automation is transforming every aspect of the business, from insurance quotes, to underwriting and policy approvals, to claims submissions and more.
Meanwhile, startups with names like the aforementioned Lemonade, Trovo and Metromile are hitting the accelerator on existing processes, while launching disruptive new insure-as-you-go services made available on mobile phones.
Yet for all the frisson it elicits, digital transformation has a downside: An explosion of fraud, which costs the industry more than $250 billion annually.
Where once processes were handled in-person and managed by real-world versions of Keyes, today they happen in moments—driven by a Millennial Generation that finds being asked to wait for anything unforgivable.
For all the complexities this involves, Keyes would instantly grasp the problem: In the digital world, it’s virtually impossible to determine the true identity of the person applying for a policy or submitting a claim—much less the risk they represent.
Over the last few years, fraudsters have compromised over 5 billion personal identities, flooding the dark web with enough personal data for criminals, crime rings, insiders and ghost brokers to reap a fortune from harvesting real identities or stitching together fake ones.
That makes fraud prevention quite difficult. Today, one in 10 account creations is fraudulent—up 35% since 2015. And fraud now accounts for 3% to 5% of all claims in the U.S. In property & casualty, that figure is 10% or more.
As a result, trust is now the most valuable currency of what is rapidly becoming a global village economy where success is predicated on the ability to distinguish trusted prospects and customers from fraudsters.
For many, this isn’t an easy task.
Today, businesses are discovering they must maintain the integrity of their online platforms and ensure that every user interaction is trustworthy and legitimate. The stakes are high as data breaches, scams and automated bot attacks can have a catastrophic impact on user trust, reputation and market viability.
The key challenge, however, is recognizing an individual when their digital persona can vary tremendously as they interact with a business at different points of a process and via multiple devices.
For example, a customer might use a mobile phone for repetitive daily tasks such as checking bank balances or ordering food, but switch to a desktop to make a higher-value purchase or preform tasks not currently supported by mobile apps. It’s the same person, but their digital footprint can look quite different.
As a result, analyzing any interaction, platform, or device in isolation cannot build a complete picture of an individuals true online behavior or their potential threat to a business.
Just as Keyes needed to look beyond the information captured in his antediluvian files, digital insurance platforms must assess all the variables of an interaction in the context of all that is known of that individual from their past behaviors.
Increasingly, that means the critical component of online authentication is establishing each individuals unique “digital identity.” This is the real-time sum of the almost infinite relationships between a person, their devices, locations and behaviors as they transact fluidly from transient locations with multiple businesses using different devices. Did you catch all that?
It’s exceedingly difficult for a fraudster to “fake” this digital identity because it’s a dynamic assessment of an individuals current behavior as it convergences or divergences from all that is known about them based on every transaction around the globe. And, as the sample size of that behavior grows across all global interactions, so does the level of trust.
Real-Time Insurance Fraud Prevention?
If you think about it, this notion of digital identity in insurance fraud prevention is a bit like the members of the entire global village economy working together as an automated, peer-to-peer based Barton Keyes, establishing trust and boosting insurance fraud prevention by sharing anonymized data about an individual’s digital interactions.
Today, a growing number of insurers are leveraging this digital identity intelligence to deliver the speed and convenience customers demand, while weeding out bad guys in real-time.
Will it be enough? Time will tell. But like the villains in “Double Indemnity,” today’s insurance fraudsters are discovering that their chances of pulling a fast one grow slimmer by the day.