Insurance Edge wanted to get the latest insights into fraud prevention, ID theft and other trends affecting the insurance sector right now. Robert Harris, Global Product Manager for Insurance Fraud, BAE Systems Applied Intelligence, told us more.
IE: A recent report that came winging its way across the desk stated that on average companies spend 1% of turnover – not profit – on fighting financial crime and fraud. That’s a heck of a lot of money isn’t it?
RH: It is, and when it comes to bigger companies it’s millions of pounds of course. And this is a pure cost to business – it isn’t an investment in stock or innovation, you have to keep spending on it every year.
The other thing to consider is that financial crime is bad for society, and actually undermines the purpose of insurance itself. That’s why we have to keep fighting fraud and other related problems – it is actually has the potential to be just as damaging as something like climate change, in that it has a long-term and lasting negative impact on society. If people lose faith in something as fundamental as insurance then that has a knock-on effect.
IE: One thing IE has spotted recently is that ID theft or impersonation is on the rise, maybe partly due to the pandemic driving so many interactions online now. What’s your experience?
RH: I was reading a report from AITE recently that revealed 47% of US consumers had experienced ID fraud, or an attempted, unauthorised financial application in their name in the last two years. That’s a high number, really high.
The report also found that around half of those affected knew the person involved in the attempted ID fraud.
So that raises the questions surrounding consumer security and how many people share PIN numbers or passwords – either knowingly or not – with friends and family. What comes across from various studies is that insurers don’t quite have the depth of data that say a bank or credit card company has, mainly because there aren’t so many interactions, so you haven’t got that detailed history.
IE: Do you think that more PAYG type insurance products will actually help insurers build up that database and so offer extra insights?
RH: It’s a mixed picture right now. Some insurers are really leading from the front and offering new, usage-based insurance (UBI) policies that function on demand. Others are still very much of the older mindset; “we are selling you annual insurance, and then we will be in touch around renewal time.”
The thing is that not only is that trickle of information from UBI products incredibly helpful when it comes, for example, to spotting patterns of suspicious activity, but it also opens up extra communication channels with the consumer. So you get to build a deeper relationship and that can perhaps mean more consumer loyalty.
A recent report from CapGemini found that 55% of insurance brokers felt that extra customer interaction helped them win new business. That same report also found that a greater use of prevention measures, rather than simply reacting to claims incidents, may well help insurers win consumer loyalty. Being on the side of the customer, highlighting fraud, ID, cyber or other risks before they happen, is another communications channel – and it’s a really valuable one.
IE: It’s interesting that as we get closer to the January deadline on consumer loyalty discounts, lots of insurance brands are looking at ways to build up their customer relationships.
RH: They are, and maybe one way that insurers can get away from selling on price is to look at bundling more products together. It could be at the point of sale, or it could for example be through a car lease agreement. I think what Tesla has accomplished with car insurance is really interesting because they have made their own insurance part of the overall experience, something bespoke. It’s all part of making Tesla owners feel that bit special.
IE: Let’s move onto car insurance. The MoJ Portal has finally gone live this year, what impact has BAE seen on claims?
RH: It is early days, but we are definitely seeing more crash-for-cash attempts this year. Maybe that’s down to the pandemic, it’s hard to say, but the other trend we are seeing is that because the Portal is quite challenging to navigate some claimants are trying more complex claims via a solicitor or other representative. So that’s for things like post traumatic stress disorder and other complex personal injury conditions that are longer term than say whiplash.
IE: So the unintended consequences of the Portal could be a spike in different PI claims, but still arising from vehicle collisions?
RH: It might go that way, although it’s a bit too early to say in relation to the UK MoJ Portal. It’s surprising that it doesn’t track IP addresses, so there is no way to cross-reference them. That does effectively leave the door open for multiple attempts.
IE: Really? That is a feature you would have expected the government to think about when they built it. What other trends have you seen overseas?
RH: What we have seen in the USA during the pandemic is a rise in supplier fraud, especially in healthcare, as the shift to online consultations and treatments has gathered pace. If there is no physical clinic then there is an opportunity for attempted fraud and this is something insurers will have to deal with in the future.
As regards Workers Comp or healthcare claims, we are also seeing ID theft/impersonation again, because the costs involved in medical care in the USA are so high it can tempt fraudsters.
Those insurers and brokers who use more data analytics tools, cross-check devices, IP addresses, family names on multiple claims etc, will definitely see the benefits in the long term.
IE: Thank you for the insights.