Insuranceciooutlook

Fraudulent Insurance Practices and Methods of Preventing and Detecting Them

Insurance CIO Outlook | Tuesday, January 24, 2023

Digitization has provided criminals ample opportunities, but strategic insurance practices can detect and prevent fraud.

FREMONT, CA: Insurance companies and their clients have benefited from digitization, but there has also been a downside. Making it easier for clients to get insurance online, customer onboarding makes it easier for criminals to commit crimes. Online claim submissions are the same. The insurers will have less work, the clients will have an easier time, and criminals will also have an easier time.

Identify fraud: In this digital age, intermediaries can better sell fake insurance because of the anonymity of the internet. Clients aren't the only ones who need to be vigilant. Ghost brokers purchase real insurance policies from insurance companies to resell to actual customers. To get a cheaper deal, they usually change a client's personal data, usually without their knowledge.

Ghost broking: A criminal's first step to committing fraud is to commit identity fraud. Criminals can use fake identities to take out insurance more easily with online onboarding.

A KYC process that is up to date will prevent criminals from using a false name to take out insurance. A potential client must not only be vetted before they are accepted. By conducting periodic account reviews, insurers can ensure their client's data is up-to-date. Meanwhile, a client's risk rating is reassessed, a crucial step in detecting identity fraud.

Climate change: Climate change will lead to an increase in property claims. There is also a risk of opportunists exaggerating the damage to their properties or making false claims about their involvement in destructive situations.

There have recently been increased European embellished claims due to more frequent wildfires, floods, and storms. Increasing storm frequency, for instance, means more chances to file a roof damage claim. An opportunity to exaggerate exists with every damage claim.

How will your organization use data to detect and investigate fraud in 2020?

Efforts are being made to prevent fraud by insurers. Through collaboration with behavioral analysts, they continuously seek ways to prevent fraud. The Dutch Financial Intelligence Unit also researches generic fraud indicators. Still, fraud is difficult to detect. Today, the number of detected fraud cases represents a fraction of the total.

There are an increasing number of detected fraud cases. This doesn't necessarily mean more people are trying to earn a buck by issuing false claims. Detecting fraud more often may be possible with better use of technology. Signals of possible fraud can be generated based on data. Insurers can save a great deal of money by preventing and detecting fraud. They can gain a competitive edge by lowering their premiums and maintaining high integrity standards

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