Insurers need to get intelligent in the fight against fraud

James Burton, senior director of product management for LexisNexis Risk Solutions, Insurance, UK and Ireland explains as fraud in the UK doubles, email and quote intelligence can become powerful tools to help detect deceit.

National lockdowns witnessed decreases in the incidence of many types of crime, however fraud and computer misuse offences rocketed. According to the Office for National Statistics (ONS), computer misuse offences doubled in the year ending December 2021[i], while fraud offences increased by 41%[ii]. As fears mount that fraudsters will exploit the cost-of-living crisis[iii] it’s imperative that insurers continue to make improvements in their processes in order to help prevent the industry and innocent customers, falling victim.

Ghost broking alone was reported to have cost victims £1 million last year[iv] and of course application fraud of all types can result in substantial claims losses. Yet, insurance professionals must strike a careful balance in using fraud detection measures at quote and during the on-boarding process, while still delivering a smooth experience to genuine customers.

Fortunately, the tools used to identify application fraud have evolved dramatically, delivering robust identity validation and flags for fraud, quickly and efficiently. One of the most recent innovations focuses on the individual’s email address to speedily confirm they are who they say they are and not linked to prior fraud.

Despite the soaring popularity of chat apps and mobile messaging, email remains a core and essential part of our everyday lives with 4.6 billion users predicted by 2025[v]. Rather like a fingerprint, every email address is unique and each individual email address connects to numerous attributes including IP addresses and domain names. The fact that an email address is so heavily tied to a person’s identity means that an email address provided as part of the application process, is one of the most enlightening pieces of customer information, for fraud detection.

By using billions of transactions from global payment processors and other online industries, email intelligence-based fraud prevention tools can provide an instant risk score to indicate whether the ID is genuine or potentially fraudulent. By evaluating metadata, for example if a domain name even exists, or bears close resemblance to the proposer’s name, individuals are placed in Fraud Risk Bands and a predictive risk score on an applicant’s email address can be obtained in a matter of seconds as part of a streamlined customer validation and verification process.

In addition to using email intelligence to help combat application fraud, insurance quote history data is also now being used to understand named driver risks, claims risks related to quote lead times and quote manipulation.

Quote manipulation has risen significantly in the past few years based on LexisNexis Risk Solutions research[vi]. Market-wide quote behaviour data can now reveal the probability of quote manipulation by comparing changes made in key fields, such as vehicle modifications or where the car is parked overnight, across online quotes. This insight can then be used as an additional risk factor at point of quote for new customers to support fair and accurate pricing, as well as ensuring insurance providers can provide the right product for the consumer’s needs.

Every day, new data is released on the impact of the cost-of-living crisis. Fraud is all too often the by-product of financial stress[vii] – whether it’s fraud by the customer such as fronting and quote manipulation or against them, as in the case of ghost broking. Data enrichment at the point of insurance quote can help prevent fraudulent business from being written as well as protect individuals from the risks of identification fraud or having their policy made null and void through deliberate misstatements.

[i] Estimates from the The Telephone-operated Crime Survey for England and Wales (TCSEW)

[ii] https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/bulletins/crimeinenglandandwales/latest#fraud

[iii] https://www.cifas.org.uk/newsroom/fraud-focus-18-feb

[iv] https://www.insurancetimes.co.uk/insight/ifed-cannot-afford-to-take-foot-off-the-pedal-when-tackling-ghost-broking/1440039.article

[v] https://www.statista.com/statistics/255080/number-of-e-mail-users-worldwide/

[vi] In a study of 1,500 U.K. motor insurance buyers in April 2022[vi], 21% confirmed they think it is completely acceptable to manipulate the information they provide for a cheaper motor quote – up from 12% in the same study in 2018

[vii] https://www.pwc.com/gx/en/issues/crisis-solutions/covid-19/increased-fraud-economic-crime.html

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