As social distancing measures took hold around the world, businesses adopted digitalisation to move even closer to customers and provide services remotely.<\/p>\n
In the insurance sector, sales processes have been digitalised and simplified for the benefit of the customer, but this opened up new opportunities for abuse and manipulation by fraudsters, at the expense of both insurers and their honest customers.<\/p>\n
A recent study by TransUnion showed that digital fraud attempts against financial services companies worldwide had risen by 149% in the early months of 2021.<\/p>\n
In 2019, Crowe consultancy estimated the annual global fraud loss figure to be more than $5 trillion for financial services companies \u2013 before Covid-19 created an environment even more conducive to insurance fraud.<\/p>\n
One type of insurance fraud that is growing particularly quickly and affects both insurers and customers is the rise of the \u2018ghost broker\u2019.<\/p>\n
Amit Kumar, Practice Leader, Fraud, AML & Security Intelligence, for SAS in Middle East & Africa, says a ghost broker is a bogus intermediary who typically targets individuals ordinarily subject to higher insurance premiums, such as students and new drivers who need to insure their vehicles.<\/p>\n
\u201cThe ghost broker\u2019s objective is to lure these individuals to fake brokerage services via social media posts or even fake websites designed to establish professional credibility.<\/p>\n
The bait is cheap insurance and trouble begins for both insurer and customer when the unsuspecting victim hands over their personal details and details of their assets \u2013 personal identification information, occupation, claim history and vehicle information can then be used in several ways,\u201d says Kumar.<\/p>\n
From there, the ghost broker either falsifies insurance documents entirely, pocketing the premiums paid, or misrepresents information to a genuine insurer to obtain discounted premiums through changing information about age, claim history and location.<\/p>\n
The victim believes they have found a good deal, but commonly the ghost broker makes only an initial payment to register the policy and then pockets premiums leading to cancellation of the policy.<\/p>\n
The victim is none the wiser and continues to pay premiums while no longer being insured \u2013 still paying the ghost broker a fee for their services. Some ghost brokers also trade in supplying fictitious evidence of no-claims discounts, which are fraudulently used to reduce premiums.<\/p>\n
\u201cIt is practically impossible for humans to monitor and police this kind of activity.<\/p>\n
SAS has worked with insurers around the world to prevent millions of dollars in premium leakage through fraud.<\/p>\n
Technology such as data mining, predictive modelling and sophisticated fraud framework applications can integrate with third-party data sources to validate application data to detect fraud and help insurers make decisions before money is lost,\u201d says Kumar.<\/p>\n
Predictive analytical modelling generates fraud propensity scores that are more accurate than any other fraud detection methods, thanks to the ability to cross-reference various sources of data.<\/p>\n
The SAS Enterprise Miner<\/strong><\/a><\/strong> creates highly accurate predictive and descriptive models based on huge volumes of data and captures customer behaviour in real-time at a detailed level.<\/p>\n That behaviour information is combined with data from offline sources and fed into a decision engine to determine whether the insured is attempting premium fraud.<\/p>\n \u201cThe deployment of sophisticated technology is now the only viable way to combat fraud.”<\/p>\n “The latest State of Insurance Fraud Technology study<\/strong><\/a><\/strong> revealed that 80% of insurers now use predictive modelling to detect fraud, up from 55% just four years ago.”<\/p>\n “Identity analytics has become a non-negotiable technology for insurers in an environment where malicious phishing scams are up 600% since the pandemic began,\u201d adds Kumar.<\/p>\n According to Kumar, insurers are diversifying their data sources to combat digital fraud.<\/p>\n Beyond their own book data, insurers are now assimilating unstructured data from industry fraud-watch lists, public records, third-party data aggregators, social media data and information from personal devices.<\/p>\n \u201cEven photo analysis technology is being used to authenticate claim damage and to identify digitally altered images submitted as part of claims.”<\/p>\n “Dubbed \u2018armchair fraudsters\u2019, these fraudsters have driven a sea change in how insurers approach verification throughout the customer and claims lifecycle to uncover subtle patterns of behaviour and linkages between network points,\u201d says Kumar.<\/p>\n