As high inflation and continued cost-of-living pressures continue to bite the balance sheets and budgets of insurance businesses and insurance customers alike, attention is turning towards the link between recessionary times and increased fraud. And while it shouldn’t take recessionary rumblings for insurance fraud to take its rightful place high on risk registers, all too often it does.
Offering his insights into where the insurance fraud landscape sits today, Rory Yates (pictured), global strategic lead at EIS, emphasised the variety and interconnectivity of the factors at play. Inflation, the fuel crisis, geopolitical tensions, global food shortages and ongoing economic uncertainty are all pain points for the market, he said, and they’re playing out against a backdrop of rapid technological changes enabling complex fraud capabilities.
Take the UK, for example, he said - it’s projected that only £1 billion of the £3 billion lost to fraud each year is even detected. A glance at some of the numbers revealing the scale of the fraud issue globally offers insight not just into the size of the challenge, but also the size of the opportunity it presents to the market. However, he highlighted the importance of recognising that this opportunity is not just about potential cost savings or increasing efficiencies but also has significant implications for making customers’ and claims handlers’ lives easier and better.
Interestingly, Yates said, the cost-of-living crisis is not just lending itself to an uptick in opportunistic insurance fraud but also to increased consumer understanding of the impact fraud has on their premiums. And while there’s a significant behavioural science aspect to insurance generally, it becomes particularly clear in the context of insurance fraud.
Where Yates feels some elements of the insurance ecosystem have let consumers down in the past is when it comes to building strong customer relationships founded on a mutual understanding of the faciliatory role insurance plays in communities and societies.
“Up until now, [insurance] technology has let the side down,” he said. “Principally, because within the technology, fraud is essentially done on the side which means it's disruptive and interruptive to the insurance journey. It hasn’t looked to create that seamless, continuous anti-fraud operation sitting behind every customer interaction that is required.
“Whereas the fraud detection capabilities within our platform – and indeed the wider market – are fully integrated. They’re engineered to be orchestrated into the experience in a way which means you really are creating the best possible path for the best possible people.”
Having a high success rate for detection services is important, he said, as it means you’re not inconveniencing legitimate customers in your quest to root out fraud. But even if a follow-up or more information is required, the right fraud detection service will not be disruptive to customers during their insurance journey but rather part of a seamless experience. This allows insurance companies to live out the principle of customers being innocent until proven guilty but also prevents them from losing customers who feel they have been unfairly maligned.
“The reality is that when it comes to opportunistic fraud, you’ve got to assume that a percentage of it is also customers just trying it out,” he said. “They’re thinking ‘maybe if I just ask for it, it will turn out I am eligible’. I’m not saying that ‘give it a go’ approach is without fault, but if you look at a typical insurance policy, as consumers, we don’t really understand what the terms and conditions actually are.
“We haven’t read the 300-page document, and anyway, it wasn't written in English, it was written in legalese. Again, technology can overcome all of that. Even from my own experience, I have dyslexia and I’ve overcome that in all sorts of ways, often by using technology to do it. And that technology could be provided by the insurer while you’re buying your insurance online. There are all sorts of great technologies that can make it clear what you’re actually eligible for.”
Where is the continuous experience in insurance? Yates asked. Beyond the point of purchase, the only time most customers hear from their insurance provider is at the point of a claim. He pinpointed the pervading myth, which is largely touted by the more mature end of the insurance technology ecosystem - that a great insurance experience is when you don’t hear from your insurer.
He understands where that mentality comes from, Yates said, and that it has its roots in the idea that this is indicative of a seamless experience.
“But I'm not an advocate of that mentality,” he said. “I think actually what insurers have to do is the opposite, to form really deep, meaningful relationships with customers because, increasingly, they’re having to be adaptive to people’s lives. I’m always hearing of claims experiences where people weren’t trying to be opportunistic but simply didn’t know what they had to provide to make a claim… And that to me is not a fair way of suggesting somebody has committed fraud.
“I feel like we’re at a tipping point moment because I think there’s enough reason to suggest that the barriers to insurers being good about fraud are no longer there, they just aren’t investing in [fraud capabilities] enough as a strategic asset. And I don’t think insurers should get let off as much as perhaps they have been in this space.”
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