The insurance industry was thriving, but since the covid-19 pandemic struck major markets, it like many others, faced many challenges. A 2019 survey by Allianz shows that almost a 4.4% increase was recorded in insurance filings. In 2018, life insurance went up from 2.8 % to 4.8 % while other insurances like property and casualty (P&C) dipped from 5.4 % to 4.3 %.
The Current State of Insurance Fraud
Insurance fraud and scams remain one of the major reasons for the diminishing insurance sector. Many companies do not realise the fact that these types of scams make premium rates go much higher and all this has a significant impact on customers. A statistics report states that $8.3 billion capital loss for insurance companies is expected each year. This loss is mostly covered by legitimate and honest customers that are not even involved in the actual crime.
Although there do exist rules and regulations which insurance providers follow to prevent money laundering and related criminal acts, these conventional policies and procedures fall short of sophisticated fraudsters that can easily outwit them using modern technology. Cybercriminals use synthetically made and stolen identities of genuine insurance holders to conduct their scams. Identity verification solutions powered by artificial intelligence is a viable option to safeguard insurers while authenticating them.
What Are Some Insurance Scams Out There?
New Account or Application Fraud
Opening new accounts and false ones is the number one fraud conducted in the insurance industry. This is often called New Account Fraud (NAF) or application fraud in which an identity thief uses someone else’s documents and their identity to create new accounts. This falls under the category of Identity theft that is carried out using stolen information that belongs to someone else. Companies that do not take relevant measures such as KYC and AML are ultimately subjected to non-compliance penalties, a loss of revenue, and lost business opportunities as well as a declined market reputation.
Just like any other industry, the insurance sector is also on the verge of data breaches. Almost 100 million people lose their identity information as a result of data breaches through insurance organisations every year. These data breaches could be significantly taken down by employing digital identity verification so that only legitimate insurers and policyholders could use the services.
Keep an Eye for the Ghost Brokers
Ghost brokers are those people who are involved in selling synthetically created and forged insurance policies in the car motor industry. Although they mainly pose as genuine and authentic insurance brokers, they actually are an impersonator trying to bag some commission by creating a seemingly false association between the insurance company and the actual policyholder. Verifying the identities of these third-party intermediaries can reduce the initiation of false insurances and save the insurance industry from financial destruction.
Perks of Identity Verification
Know your customer processes ensures that Identity Verification that is performed during customer onboarding is transparent and in accordance with global standards, policies, and procedures. Digital KYC solutions incorporate identity verification systems that could be installed or integrated at the insurance company platform, helping them reduce possible cybercrime and suspiciously fraudulent activities. Listed some aspects through which identity verification could be achieved.
Through online document verification systems, insurance companies can verify and identify their users, customers, and consumers using details provided on their ID documents. Now, document verification solutions also look for document authenticity to take down digital ID fraud in the best possible way so that bad actors do not get the better of innocent customers
Face Recognition Technology
Another quick and reliable method to perform identity verification is through face verification recognition technology. Using facial biometric techniques, a user can scan their face and submit a selfie which the intelligent system will use to create their biometric profile. This information will later be used to perform identity authentication of the customer through which insurance frauds could be prevented in the long run.