Opportunistic fraud is up 61%: how can insurers react?
Opportunistic fraud cases in insurance rose a stark 61% between March 2022 and April 2023, as consumers continue to deal with the cost-of-living pressures sweeping markets worldwide.
So much is this an emerging epidemic that in the UK, The City of London Police’s Insurance Fraud Enforcement Department (IFED) has had to warn the public about the risks associated with committing insurance fraud.
Fraud and recession: A match made in hell
It’s small wonder then, that EIS’ Global Strategic Lead, Rory Yates, calls “fraud and recession a match made in hell".
And while many onlookers may hope the worst of these economic troubles are fading, a 13th consecutive interest-rate hike in the UK alone may explain why Yates feels the insurance market “is headed for a perfect storm, as events and advanced fraud capabilities collide”.
Yates continues: “With so many factors coming simultaneously - inflation, the fuel crisis, Brexit, the war in Europe, global food shortages, and political and economic uncertainty - financial waters are extremely choppy, and recession is almost inevitable.
“Couple this with rapid technological changes enabling complex fraud capabilities, and you have an explosive mix.”
This is especially true of opportunistic insurance fraud, “which doesn’t follow a discernible pattern, making it challenging for insurers to spot”, according to Yates.
The advancement of fraud tech
Not only are opportunistic patterns contributing to the rise of fraud, but insurers' lives are becoming evermore tricky with businesses seeking more claims as a result of rising deep fake usage.
Sumsub reports that deep fake fraud cases have risen 10% in Q1 2023, already surpassing the amount detected for the full year of 2022 alone.
Spain accounted for 49.7% of all deep fake points of origin, while Great Britain and the US accounted for 9.3% and 4.2% of deep fake fraud cases respectively.
How insurers must respond
With insurers facing cases of fraud as well as the businesses they provide coverage for, Yates says insurers need to up their count “of quality data that can be easily integrated”, as well as conduct “real-time analysis, privacy & security compliance to incorporate fraud naturally into the claims experience for customers and employers”.
He adds: “When this happens, you can detect fraud using advanced scoring models that identify bad actors while clearing appropriate cases for straight-through processing.”
It is therefore clear that insurers need to scale their technological capabilities to match the threat from fraudsters.
One such capability is online identity verification provider SumSub’s new AI-powered deep fake fraud detector, which has been added to its in-house offering to enhance the verification capabilities of its clients and mitigate the risk of fraud.
Legacy insurers face toughest fraud fight
It is thanks to the likes of SumSub, among other technology providers and insurtechs, that insurers are able to mitigate against the current tide of rising fraud.
But, with many legacy insurers slow on the uptake of technological innovation, Yates believes this makes them the most vulnerable to fraudulent attacks.
He notes: “Legacy technologies and a compilation of disparate systems that sit in isolation and are almost impossible to bring together to create a single view of the customer.
“Orchestrating this experience with fraud capability is not possible for most insurers to realise.
“To avoid the reckoning to come, insurers must jettison legacy mindsets that put the policy at the heart of their business and create a connected ecosystem that puts the customer there instead.”