How tech can reduce fraud application risk

The insurance market has seen ups and downs in the last few years, but the growing use of online systems to manage and protect businesses in this sector is especially notable. 

As helpful as such solutions can be, there's also an inherent risk of fraudsters trying to manipulate insurance application processes.

It's important for insurance companies to make sure their fraud prevention and detection technology is strong and complex enough to tackle any situation. The bigger demand and limited workforce insurers had to deal with made online services the best option. Onboarding, processing claims, interacting with customers, troubleshooting, and other jobs became simpler.

The downside of the change is that it also made scams like application fraud easier. All a bad actor needs now to deceive insurers is a computer, fake ID, doctored proof of their exaggerated claims, and convincing lies. Some people even intentionally damage goods for their insurance. It doesn't help that online companies often sacrifice vigilance to get more clients faster. 

In short, insurers that do most or all of their work online, selling policies and verifying claims especially, need sophisticated processes like customer due diligence (CDD) to counter fraud. 

There are over 7,000 insurance organizations in the U.S., and insurance statistics show that 20% of claims in 2021 were some type of fraud, most commonly involving false injury, staged accidents, and nondisclosure of relevant information.

The threat of scammers, however, doesn't change the fact that this industry is important to individuals and businesses alike. They just have to acknowledge and prepare for dangers, which now come from the digital world more than ever. 

The point of fraud prevention technology is to help make the insurance industry safer. And the more intricate and practical the security system, the harder it is for fraudulent claims to get through.

But what does sophisticated fraud protection look like? Besides clever techniques like digital twins, it largely involves screening the information an applicant provides, as well as additional data connected to their online presence. This way, you can confirm their identity and details without causing too much friction.

Their email address, for example, is prime raw data with links to online accounts and activities. Data enrichment can track and gather this extra information to see whether the claimant is genuine or not.

A phone number can reveal just as much useful data about the user, from their mobile carrier to whether their SIM card is a real or virtual one. 

The algorithms and agents behind fraud detection systems look for red flags like names and addresses that don't match or associations with suspicious or blacklisted domains.

Another big asset to catching fraud is the IP address. It can reveal the user's data centers, devices, VPN, plugins, and even geolocation, any of which can also flag up hints of fraud, like suspicious proxy usage and multiple people sharing the same IP. 

There are many more ways to reinforce an insurance company's procedures against fraud. Depending on your needs you could add fingerprinting analysis, BIN lookups, and video ID checks, while always keeping data flow high and making sure that there aren't too many obstacles in a customer's journey. 

Processing applications in any sector is hard enough, but insurers have to be extra careful about who they accept. Fraudsters get away with all sorts of scams and land companies in a lot of trouble. 

Widespread digitalization creates more opportunities for bad actors to manipulate insurance services. However, it also offers plenty of powerful tools that can verify every person and claim that passes through your system.

Set up the right combination of security checks and you can get the best datasets to make informed decisions about applicants and avoid malicious users, from the simplest to the smartest scammer. Fully embracing online technology can turn it to your advantage and beat fraudsters at their own game.