In this latest Opinion piece, Cate Wright, Global Head of Customer Success, Financial Services, at BAE Systems, takes a look at fraud from a broker or MGA point of view. It’s always good to identify the typical `tribes’ of fraudsters and hackers actively targeting your business. But did you know that upping your game can also win your brokerage preferential rates?
BAE Systems recently put together a handy guide called, Know Your Enemy, which aims to help insurers understand and tackle the constantly evolving threat of financial crime. As with any crime, understanding the motive is crucial to identifying the criminal.
Knowing where the threat is likely to come from means you can design specific defences and counter-measures to help identify, intercept, counter-act and even prevent insurance fraud . You can often identify particular insurance fraud “tribes” for example;
1. The Accidental Criminal: invents or inflates a claim to help them through financial hard times – sees the fraud as no big deal, a one-off.
2. The Habitual Opportunist: often evolves from the Accidental Criminal – having got away with it once, sees the opportunity for regular income and looks for new methods and companies to defraud – what started as a one-off becomes a habit.
3. The Criminal Insider: often a trusted team member with an exemplary service record, seems no different from anyone else in the office – rather than acting alone, more likely to be working with a criminal gang (either willingly or through coercion) to help them breach cyber defences by providing customer data/security details.
4. The Fraud Facilitator: carries out cyberattacks either alone or as part of an organised gang, feeding data to gang members or selling it on to other criminals – without Fraud Facilitators much insurance industry fraud wouldn’t be possible.
5. The Former Employee: moves on from being a cultural risk in the office to being a security risk once they’ve left the business – operates in a range of ways, from stealing customer data to installing malware into software to be triggered when they choose.
Plus, there’s the freelance sub-contractor to consider and we will touch on the specific risks associated with outsourced support in a while.
6. The Organised Criminal: insurance fraud is probably just one of their activities – may be running a crash-for-cash ring, a team of hackers, be involved in the drugs trade or people trafficking – access to data and cash is the main motivation.
The solution is to focus on deterrence and defence, bringing anti-fraud and cyber security communities together. Too often, an insurer’s fraud team identifies a threat or an attempt to defraud, is unaware of the cyber element of the fraud, and fails to tell the cyber team what they are investigating, when often both are investigating two elements of the same crime.
Modern crime is so intricate that an organised fraudster seldom acts alone or against just one insurance company or broker. This makes interaction between different divisions within an insurance company, and between different insurers, crucial to the fight against organised fraud.
One other important thing to consider is that fraudsters are often trawling social media, looking for signs of financial distress among your staff. Employees would be wise not to mention things like relationship breakdown, because criminals could target an individual, hoping to exert pressure on them to sell data for example, to raise extra cash for house moving, divorce costs or other requirements.
Another thing worth considering as the gig economy expands is applying the same rigorous Know Your Customer practices across your freelance, or outsourced supplier pool. Who are your freelancers or consultants, what motivates their application to work for your brokerage, do they work in a shared office where conversations can be overhead or data recorded on smartphones? Ask yourself how much data do freelancers need to have access to in order to work in a particular role?
There have to be some financial and personal questions asked before you effectively give any freelancer the keys to your IT system, or at least a part of it, such as a website admin page.
By explaining the need for data security in detail, and the company’s liabilities under GDPR, money laundering and other regulations, you can manage expectations freelance contractors may have.
So, what is the bottom line when it comes to anti-fraud policies and products? Yes, it can cost money every month, but brokers and MGAs who can demonstrate to insurers that they’re raising their game when it comes to dealing with fraud and cyber crime, can often find the reward is preferential rates on products.
Think of this as a kind of No Claims Discount for your business – by showing your partners that you are on the ball, fully compliant and actively preventing data breaches, cyber attacks and more, you improve the policy margin on a daily basis. When that margin translates into, say, thousands of motor policies each year then the upside is very healthy indeed.
That’s a win-win, plain and simple.
This article is sponsored content, produced in association with BAE Systems