Financial fraudsters are cunning. They’re constantly evolving their patterns of attack, tools and evasion methods, causing major headaches for Canadian insurers and other financial service firms.
Insurance organizations today are under enormous amounts of pressure to provide a positive, slick and easy customer experience. At the same time, they have to carry out fraud prevention and data security measures, which potentially contradict some of the modern-day consumer experience expectations. It can be a difficult balancing act.
“In this connected world, consumer identity and identity security are contradictory to each other,” said Anne-Marie Kelly, executive director of identity management and fraud solutions for TransUnion Canada. “Consumers struggle to remember an ever-growing number of usernames and passwords, and organizations struggle to manage them. The result is a constant tug of war between organizations and consumer needs, which provides criminals with a playground of information to use to perpetrate identity crimes.”
According to a study conducted by TransUnion on behalf of Forrester Consulting, 57% of Canadian insurance firms agree that fraudsters are constantly evolving their tactics and are always one step ahead. Furthermore, almost half of the respondents (45%) acknowledged they have a lack of specialized skills required to detect increasingly sophisticated fraud schemes.
In the last year, Canadian insurance firms reported seeing an increase in fraud with 66% of respondents saying they experienced more soft fraud (i.e. rate evasion), 58% reporting an increase in identity fraud and 36% experiencing an increase in hard fraud. Many fraudsters were exploiting identity verification weaknesses in the insurance application process, and yet most insurers said they would not put consumers through an onerous fraud mitigation process because they do not want to damage the consumer experience.
“As customer behaviours and expectations are changing, insurers need to enable those changes and evolve their processes, like fraud detection and identity verification, so they can be done in real-time and without the sacrifice of good customer experience,” Kelly told Insurance Business. “To
develop a seamless fraud prevention and identity management framework, insurers should use evolving, overlapping networks of physical and digital risk signals, and work with other financial services industries to fight identity fraud together.”
Gone are the siloed days where separate industries educate their consumers alone, according to Kelly. She said all financial services industries should be banding together to educate consumers about how to protect their identities. As more and more Canadian consumers purchase their personal insurance online, it will become easier for insurers and brokers to push out these best-practice materials and educational tools, she said.
“Insurance brokers can help in the fight against insurance fraud by really getting to know their consumers and making sense of the consumers’ surroundings,” Kelly added. “It’s not about being an expert in document authentication so you can spot a fraudulent driving license or a forged document. It’s more about being able to identify if the details are correct, for example if a property description is accurate (e.g. is it more likely to be a condo or a cottage?) or if an address is real or made up. The more information brokers can get on the front-end will always help in the back-end.
“Fraud and identity theft prevention doesn’t stop at the first point of meeting a consumer, whether that be face-to-face or online. There are multiple organizations within the fraud detection and prevention chain that play really important roles in identifying whether or not somebody is a victim, or somebody is trying to perpetrate fraud. For the brokers and agents out in front of the customers, it’s really about identifying whether or not the surroundings make sense and collaborate with the identity documentation.”
