Insurance application fraud has been on the rise for the past decade but in the past year, pandemic-induced fraud has created a new level of urgency to tackle the problem.
While application fraud is often the deliberate misstating of data in the application to get a cheaper quote, the use of stolen or fake identities to procure insurance – either to sell bogus policies or to pursue staged claims – is putting the insurance market under increasing pressure to improve the robustness of identity (ID) validation checks at the point of quote. Customer experience is everything in such a competitive market, so enhancing the validation processes needs to be done without causing friction for the vast majority of customers who are genuine.
Email address intelligence and shared fraud data direct into insurance workflows through a single point of access to a wide range of insurance-specific data are helping to solve this challenge, enabling insurance providers to understand the risk of fraud in real time.
Before the pandemic struck, cases of application fraud were up 200% in 2019 compared to the year before, according to the Association of British Insurers. Fears that cases would increase as an outcome of the pandemic have been realised in data released by the market this year. In June 2021, Aviva confirmed that the number of cases of application fraud and ghost broking it had detected had grown by more than a third in 2020, while Action Fraud, the national fraud and cybercrime centre, reported it had received 694 reports of ‘ghost broking’, with almost a third (29%) coming from victims aged 17-29. The Insurance Fraud Bureau has since issued a stark warning to the many newly qualified young drivers who had to delay their driving tests due to the pandemic, to beware of scams offering fake car insurance policies on social media.
The insurance market has developed strategies to tackle ‘front-end’ fraud using ID validation checks to help confirm the applicant is who they say they are. Indeed, these checks have become part and parcel of a swift risk assessment process leveraging data enrichment and high-volume capability platforms such as LexisNexis® Informed Quotes that provide a single point of entry to a whole host of private and public risk data for the insurance market. This includes industry databases of known fraudsters such as the National SIRA database, to help insurance providers identify nefarious individuals before they become customers.
Successfully matching the insurance providers’ customer data against the National SIRA database to flag individuals who should undergo additional validation, prior to or post policy inception, is highly dependent on the number of datapoints that can be matched, especially where there may have been deliberate errors and misspellings included in the information provided during the application. The more data points that can be matched, the greater the match rate. As such, email addresses and telephone numbers are now included in the datapoints delivered to insurance providers via their data enrichment platform, providing a new and vital step in ID validation and fraud prevention processes.
The next advances in identity validation utilise a piece of information already provided during the application process – the applicant’s stated email address.
Today, the number of email users worldwide stands at a record 4.03 billion, and by 2024 this figure is projected to reach 4.48 billion. Email addresses tend to be unique to each individual and usually stay with a person over time, in fact 91% of people have had the same email address for three years or more, and 51% for more than 10 years.
An email address has therefore become a unique and persistent global identifier. It is also often linked to multiple online accounts and transactions, creating digital footprints that could make it one of the most powerful tools for detecting application fraud.
To make email address intelligence workable within insurance, an instant risk score is now accessible at the point of quote, based on billions of transactions from global payment processors and other online industries, including 82,200 fraud events shared on average daily. The score indicates whether the identity is genuine or whether it could be fraudulent, by evaluating email address metadata points such as whether the email and domain even exist, or whether the email bears a close resemblance to the proposer’s name for the policy. The score can automatically validate quotes that come through and may also help inform pricing decisions.
Email address intelligence is already working to tackle identity fraud in the banking sector and is now strengthening the ID validation process in the insurance market, helping providers spot potential cases of application fraud early in the customer onboarding process.
While insurance claims fraud is still a major challenge for the market, the rise in front-end fraud is heightening the need for data and technology innovations such as these to deliver swift ID validation and flags for fraud risk, without detriment to the customer experience. They can help protect the innocent, often younger, motorists from the scourge of ghost brokers while reducing the market’s exposure to fraudsters intent on committing claims fraud, all of which adds to the cost of insurance for everyone.
James Burton is senior director of insurance product management for UK and Ireland at LexisNexis Risk Solutions