LexisNexis Risk Solutions Fraud Report Sounds the Cyber Crime Warning Bell for Small Businesses. Here’s What Else It Had to Say
Now more than ever, commercial insurance carriers must focus on protecting customers’ data and the ever-present concerns of identity fraud and cybercrime.
A significant increase in consumers’ digital activity usage – described in a new insurance fraud report from LexisNexis Risk Solutions and Aite-Novarica Group – reveals that insurers have seen significant increases in digitized underwriting (77%) and claims (76%) compared to pre-pandemic levels in early 2020.
The biggest drivers behind the increase in digital activities are consumers opting for convenience and younger buyers increasingly purchasing policies online.
This digital transformation represents an immense opportunity for commercial insurance carriers who are leveraging data to automate underwriting and claims workflows.
Because of their familiarity with carriers’ digital tools and comfort with remote interactions, tech-savvy consumers are likely to continue pressing the industry for fully customized omni-channel services — all online.
Small commercial carriers that have seized the opportunity to become more digitally agile are likely able to outpace those who have been slower to adopt by deepening customer relationships over the life of a policy and improving service speed, all while reducing operating costs and growing revenues.
But with the benefits of digitization come additional risks. The report notes that 67% of carriers surveyed said the increase in digital activity has spurred higher levels of identity fraud. Bad actors are finding new opportunities to access and steal identities or use stolen or synthetic identities to commit financial fraud. The trend is expected to continue and at higher levels than pre-pandemic, according to 42% of carriers surveyed, resulting in what appears to be a new normal for the industry.
With the automation of insurance workflows seemingly here to stay, how can carriers help mitigate fraud without adding too much friction to the customer experience?
Identify Vulnerabilities and Key Focus Areas
To protect carriers and their customers, regular assessments designed to identify and minimize vulnerabilities to fraud across the workflow are critical. During these evaluations, carriers should be particularly mindful of some specific areas that fraudsters are targeting at increased levels, including:
- Purchasing a policy, creating a new account, or accessing an existing account through increased use of online portals.
- Submitting an application or taking over an existing account based on false information.
- Gaps in safeguarding the use of alternative underwriting methods and data.
- Gaps in understanding the electronic devices interrelating with a carrier’s system due to fewer in-person interactions.
The three common fraud entry areas in a carrier’s workflow are at the underwriting or point of application, the customer service experience or at renewal, and the claims process at the point of payment. Carriers should focus their investments on those three transaction points and continually look for opportunities to layer in additional fraud mitigation strategies.
According to the Aite-Novarica fraud report, small commercial carriers face the greatest chance of fraud in claims, making it the primary focus for small commercial carrier fraud investments, followed by customer service and then underwriting.
Common solutions such as one-time passwords and multi-factor authentication have been heavily adopted and are effective, but there are many other identity management and fraud mitigation strategies that are being underutilized. With the proper guidance, small commercial insurers can digitize their businesses and deliver a superior customer experience while still protecting customer data.
Implement a Multilayered Fraud Strategy
No single technology will adequately detect and prevent fraud. To best address advanced fraud methods and vulnerabilities, small commercial carriers should complement existing customer-facing solutions with a combination of solutions – also known as a multilayered approach – to address fraud risk in underwriting, customer service and claims.
For carriers looking to improve their identity verification ability, one-time passwords and password-free authentication are additional layers that can be added to the multi-factor authentication solutions that they’re likely already using.
When it comes to fraud mitigation solutions, fraud risk scores are being used more frequently by small commercial carriers than other lines of business, but many carriers are not utilizing them to their full potential. Fraud risk scores help develop criteria for identifying risk.
Used properly, they can automate carrier workflows by assessing the risk associated with each session and escalating those that cause concern. This can create a much smoother customer journey.
Link analysis, which sifts through data repositories and makes connections between customers and accounts, can be further leveraged, especially by small commercial carriers, as all small business owners have personal financial profiles that provide additional activities and insurance policies by which to compare identity and activity connections and spot disparities to investigate for fraud.
Mitigate Fraud While Upholding Superior Service
Protecting your small business customers throughout their insurance workflow is essential. However, balancing the need for an effective security strategy while elevating customer experiences in the increased pace of a digital world can be confusing.
Implementing a multilayered fraud mitigation strategy proves to customers you can protect their data and deliver a superior policy with less friction, which will strengthen customer satisfaction, retention and drive growth.
For small commercial carriers looking to get in front of fraud risks, now is the time to formalize your evaluation process and ensure you have a comprehensive multilayered fraud mitigation strategy to protect your customers and your bottom line. &