I would consider insurance services as being the core safety net that the financial services sector has to offer society. Particularly in the context of the current cost of living crisis, the insurance industry has a more important role to play than ever.
If a person suffers an accident, injury or loss, and they’re not covered by insurance, they could be footing a hefty bill and end up owing money that they just don’t have.
However, despite millions relying on it, the sector is too often being taken for a ride by opportunistic fraudsters. In fact, industry fraud levels have recently reached record new heights.
The Insurance Fraud Enforcement Department (IFED) recently confirmed that reported cases of opportunistic fraud from March 2022 to April 2023 rose by 61% from the previous period, with motor insurance fraud (51%) being the most common type, followed by property
insurance fraud (29%).
The impact on the end-customer
But what does this look like for the industry and what is its impact on the end customer?
Insurance fraud usually occurs when somebody provides false information when applying for insurance, knowingly submitting a false claim or taking advantage of an otherwise legitimate situation to exaggerate a claim for financial gain.
Examples of this could include manipulating data to achieve a cheaper insurance quote, faking an injury following a genuine road traffic accident, or claiming twice on insurance after losing an item of jewellery.
But these crimes aren’t victimless, and the impact on genuine customers is severe. The cost of fraud pushes everyone’s premiums up and all customers end up paying a lot more for the dishonesty of just a few.
And for the fraudster - who may have hedged their bets as a one off, falsely claiming on their insurance as they thought it was justified to deal with rising costs - the consequences are serious. The only thing they’re likely to gain is a criminal record,
making future insurance and other financial products harder and more expensive to obtain.
Insurance fraud in all forms needs to be stamped out. Ultimately, hiked premiums lead many to believe that insurers are out for themselves, preventing the industry of fulfilling its role of being a safety net for people when things go wrong.
Take matters into your own hands
Firstly, insurance firms must communicate the dangers of committing insurance fraud more effectively.
Indeed, there are host of potential consequences, including that the perpetrator will be unable to insure a vehicle for third-party cover, which is a legal requirement for motorists, or get buildings insurance, which is often compulsory for securing a mortgage,
or take out liability insurance, which is required for many business premises, or have life and death insurance, which can leave loved ones in financial hardship. In addition, they can potentially face imprisonment and large fines.
Accurate policy pricing based on true risk calculation and early fraud detection are also key for both consumers and insurers, and insurance firms can take matters into their own hands by implementing such tools.
Trusted data must be the fundamental underlying principle of how insurers tackle opportunistic fraud. That same data can also help insurers to validate insurance applications and legitimate claims, meaning genuine customers get a swifter onboarding process
and claim settlements can be expedited.
However, today’s customers expect a swift, seamless insurance service. This means that the data and analytics that help insurers to detect and prevent opportunistic fraud must be easily integrated and not cause process delays.
The insurtech industry is enabling the wider sector to deliver on these customer needs and helping in the fight against fraud.
CRIF has been supporting the UK insurance market for over 25 years, while helping the industry combat fraud. Through utilising data, artificial intelligence, proprietary machine learning techniques, and analytics we’ve been helping organisations to identify
fraudulent connections. Our system assigns a fraud risk score in real-time, helping insurance companies to significantly speed up their ability to identify a high volume of information and mitigate fraud attempts.
Restoring faith in insurance
Insurers appreciate that many customers are facing financial pressures due to rising cost-of-living bills, and they are doing all they can to help, while continuing to pay genuine claims as quickly as possible. But whatever the financial pressure, making
a fraudulent insurance claim is not the answer.
Insurance firms have the power to stamp this out and bolster their reputation as a safety net for society. They must communicate that insurance fraud isn’t just one of those crimes that doesn’t hurt anyone in particular except the corporate insurer. They
must highlight the very real dangers that claiming falsely can have on an individual’s own insurance prospects. And they must adopt the right technology and harness data and analytics to detect and prevent insurance fraud.
Only by utilising the latest technology, partnering with the right innovators in this space can the sector clamp down effectively on these claims and be able to maintain its reputation and retain and restore customer confidence.