In this Opinion piece, Toby Stubbington, Managing Director of loveit coverit, looks at the latest techniques in fighting fraudulent mobile phone claims. With modern handsets like the iPhone X, Blackphone and Samsung Galaxy S9 all costing over £500 to buy these items are well worth insuring, and there is a temptation to make a false claim on high value smartphones and tablets.
Insuring over 900,000 devices to date, loveit coverit has provided mobile phone and gadget insurance for almost 30 years. All claims are handled by their friendly, UK based in-house team.
With more policy choices than ever before, the increased flexibility brings with it more opportunities to cheat the insurers. Insurance fraud is alarmingly commonplace, especially when it comes to mobile phones. As smartphones are becoming more sophisticated and more expensive, there is a greater incentive to make false claims.
Industry experts estimate that four out of ten mobile phone claims are fraudulent – the most common claims are for lost devices and accidental damage claims. Luckily, there are a range of technological and human innovations that can help insurance providers and industry regulators combat fraud.
Providing additional evidence
Most insurers also ask for an International Mobile Equipment Identity (IMEI) number, which is unique to each device and can be blacklisted in cases of theft. This creates a point of reference if the customer tries to make a claim for damage that occurred before the policy’s inception, or applies for a theft claim. The IMEI is used across insurers, purchases of second-hand devices and networks to help reduce fraud.
Another way to reduce the number of fraudulent claims is for insurance providers to request photographs of the insured device at the start of the policy, required proof of purchase of the device and proof of barring at the time of the claim.
The rise of blockchain technology
Blockchain is a string of data that is defined by three key characteristics. Firstly, blockchains are distributed across a peer-to-peer network, so there is no single master copy which can be manipulated. Secondly, a single block in a blockchain cannot be deleted or changed unless you have the key to amend the entire chain. The blocks are then given a timestamp, creating a clear and accurate transaction history. Finally, blockchains are only accessible with the correct permissions, creating a strict access and identity management system.
The clear audit history that comes with blockchain can easily show when data has been edited and by who, making it harder for fraudsters to falsify information. Applied to the insurance industry, blockchain will ensure, over time, that only valid claims are approved, speeding up the claims process and improving levels of trust between company and consumers.
Knowledge and training
Insurance claims handlers are trained to spot suspicious patterns of behaviour which can highlight potentially fraudulent claims. For example, customers may try purchasing policies for the same device with several different insurance companies, or exaggerate the extent of the damage in the claim. If there are inconsistencies in their story or the customer is acting strangely, the claims handler can flag the claim and prevent their case from being processed. Creating a central database and working in collaboration with other insurers can also help flag serial fraudsters – in the long run the time and money saved from chasing fraudulent claims can be passed on to the consumer.
Criminal records and harsher penalties
Insurance fraud is often thought to be victimless, but the frequency and scope of fraudulent claims affects the whole industry. According to the Insurance Fraud Bureau, false claims account for more than £1.6 billion annually, which in turn hikes up policy premiums for the consumer.
Given the scale of the problem, it’s no surprise that insurers are taking a tougher approach to combat fraud; penalties can range from a customer’s policy being cancelled to facing criminal charges under the Fraud Act. Many companies now implement a zero-tolerance policy, with fraudsters blacklisted from purchasing insurance policies in the future – in some cases this also extends to a ban on other financial services such as credit-card loans.
The smartphone insurance market has certainly adapted to meet the everchanging needs of the consumer, but there’s still work to be done when it comes to addressing gaps in transparency. To ensure a sustainable future, insurance companies need to be able to provide the flexibility and competitive prices demanded by consumers, whilst tightening against fraud to allow them to do this.