The insurance sector was on a roll before the COVID-19 pandemic took a toll on major businesses in the market. A 2019 survey by Allianz – a global service provider in the financier industry – states that a 4.4% increase in gross premiums was recorded as opposed to the last year that made almost 3.906 trillion euros in total. When we talk about life insurance, it as compared to other insurances such as property, casualty and health, grew 4.4% from 2.8%. Property & Casualty (P&C) insurance went down from 5.4% to 4.3%.
Table of Contents
How Bad is Insurance Fraud?
One big reason for the downfall of the insurance industry is the increasing number of fraud cases. A rise in premium rates means that more people are affected which can significantly impact the customer experience in the long run. Identity-related theft causes a loss of more than $30 billion each year on average to insurance firms. That being said, most of the lost resources are covered by honest individuals that are not even involved in this crime.
Currently, due to the lack of proper procedures and policies to verify the identity of potential customers, the industry remains at constant risk of losing greater capital. Manual methods of identity verification have become a thing of the past since bad actors can easily get away with falsely created ID documents to impersonate another person. To address this problem, insurance businesses while conducting customer onboarding, need a robust digital identity verification solution to cater to their needs and ensuring no fraudster gets away with deception.
What are Some Frauds in the Insurance Industry?
The Federal Bureau of Investigation (FBI) issued a report according to which 7000 insurance firms collect premiums worth $1 trillion each year. The number is particularly alluring for fraudsters that see it as an opportunity to conduct illicit fraud in the insurance industry. Below are listed some most common fraud in the insurance sector:
- Application fraud
- Data reaches
- Ghost broker scams
- False insurance claims using someone else’s identity
Identity Verification – Onboarding Legitimate Users
Know Your Customer is a process that every business performs to better identify their customer and verify important details about them. A secure and well-defined KYC procedure list makes room for a much more transparent identity verification that can take place considering state-of-the-art financial regulations that help mitigate fraud at scale. A digital identity verification solution can either be integrated into the insurance company’s website/platform/service through API integration, or they can use an on-premises IDV solution that is installed in the in-house system for real-time authentication of legitimate users.
These online identification systems act as a strong deterrent against any types of potential cybercrime such as data breaches, identity theft, account takeovers, and facial spoof attacks. Below are listed some products that come under the identity verification service:
Face Biometric Technology
With intelligent facial recognition technology, insurance businesses can now breeze through the identity verification of their prospects. By taking into consideration the unique facial traits of the end-user, a faceprint is constructed against a particular user that serves as their biometric identity for future authentication. Individuals that wish to apply for an insurance policy can scan their face and the rest is taken care of by the identity verification system running on the back-end. Now, customers can easily file an insurance claim and avail their benefits by providing facial proof each time they need to use their insurance.
Digital identity verification is best performed using user ID documents. Insurance companies can now use document verification services to verify any onboarding client before the insurer actually grants them the rights to file a claim. An effective identity verification solution takes into account the original documents of the user, extracts relevant information such as name, date of birth and address from it and then performs a detailed verification of the document authenticity and identity of the user. These types of identity verification services not only allow insurance firms to practice KYC standards and regulations but also to deliver a purposeful and seamless experience to their customers – one that they actually deserve.