Another successful International Fraud Awareness Week is coming to a close. International Fraud Awareness Week is the annual observance where fraud mitigation professionals, industry and policy groups and other cause-related organizations shine the spotlight on fraud prevention awareness and education. Fraud is an age-old problem with insurmountable costs spanning all industry sectors, yet recent focus has been on the growing threat from identity fraud. The digital age has enabled identity fraud at an unprecedented scale, where stolen and synthetic identities abound, as do schemes of incredible scope and cunning. P&C insurance is not immune, as the industry continues moving away from multi-touch, in-person interaction toward online services and a direct sales model.
Identity fraud concerns increase with online transactions
The heightened concern over fraud from stolen identities was substantiated in the 2017 LexisNexis Fraud Mitigation Study, which surveyed 800 fraud mitigation professionals from five industry sectors (including P&C insurance) and government about several fraud-related trends, including those related to identity fraud. The study found that there are greater concerns about identity fraud within online transactions versus within offline transactions, and the concerns were highest among insurance respondents (63%) compared to those from the other industry sectors (55%). This may be due to the fact that 63 percent of insurance respondents indicated that more of their transactions have moved online over the past three years. This was slightly ahead of respondents from healthcare, financial services, retail and government, and only behind the communications industry (see chart). The study also found that insurance professionals and financial services were most likely out of all industry groups to take new or additional steps to protect their customers from identity fraud in the prior year, including:
- Adding additional identity verification processes for customers
- Conducting an audit of system security
- Hiring additional people to detect fraud
- Verifying transactions/applications against a list of known compromised identities
- Implementing data analytics or an analytics engine for earlier fraud detection
The delicate balance: effective prevention and customer experience
The additional fraud prevention precautions identified in the 2017 Fraud Mitigation Study are also consistent with study findings that organizations are currently spending more resources to identify/block suspicious transactions (42%) than to expedite safe transactions (28%). Insurance respondents (37%) were most likely out of all industry groups to indicate they are investing in fast-tracking safe transactions, yet this was still evenly split (35%) with those insurance respondents that indicated that their organization still focuses on the bad. It remains to be seen how additional scrutiny and fraud prevention enhancements may be impacting the customer experience. In an interesting twist, the Coalition Against Insurance Fraud reports that more than half (55 percent) of U.S. consumers say poor service from an insurance company is more likely to cause a person to defraud that insurer.1 On the upside, the same organization reports that nearly 75 percent of insurers use automated systems to detect false claims.2 Carriers are recognizing the need for automation – a need primarily driven by a desire for greater efficiency, lower costs, and an enhanced customer experience.
New tools for friction-free fraud prevention
In recent years, there have been technological advancements in big data, predictive analytics and social network graphing that have helped us to proactively prevent more fraud than ever before. Automation and data analytics advancements are valuable, yet still rather myopic in that they typically only consider a limited number of data points specific to the case at hand. By adding data assets from other insurance organizations and also from industries outside of insurance, investigators can get a more holistic view of a subject or a case. Information from multiple industries adds a new level of reliability and confidence to transactions, to help minimize unnecessary scrutiny and reduce frustration and financial or emotional friction for customers at the point of application or service. The Fraud Mitigation Study findings support the notion that outside data is viewed as an asset. Fifty-five percent of respondents believe access to within-industry fraud data would be highly valuable, and 44% see high value in access to outside-industry data. Insurance respondents were ahead of all other groups in their perceived value of receiving data both from other industries (61%) and from other insurance carriers (53%).
Greater automation in insurance has supported consumer demands for a faster, easier and more seamless experience. Yet more automation and new digital processes can potentially increase exposure by carriers to identity-related fraud. Organizations can enhance fraud mitigation efforts by incorporating data assets from multiple industries. These additional insights can bring new and meaningful information connections to provide insurance carriers and other organizations with greater confidence in fast-tracking transactions, leading to improved customer satisfaction and more wins in the battle against fraud.
Access the full 2017 LexisNexis® Fraud Mitigation Study, and tools and fraud prevention tips on the 2017 Fraud Awareness Week microsite