From synthetic identities to AI-powered scams, fraudsters are becoming increasingly sophisticated in their attacks, adapting their tactics and leaving organizations scrambling to protect their assets and customers.
Fraud is also becoming more costly, responsible for businesses worldwide losing an estimated 5% of their annual revenues through various schemes.
Forbes estimates that insurance fraud costs companies more than $300 billion annually. Of course, companies aren't the only victims as fraud is associated with a $900 increase in customer premiums.
That's why insurers face a difficult task: combating fraud and implementing consumer protections without eroding the customer experience.
Fortunately, it is possible. Here's how.
See also: How GenAI transforms insurance fraud
Adapt to the Latest Fraud Trends
Few technologies garner as much attention and trepidation as generative AI (Gen AI) and machine learning (ML). Just two years after OpenAI's ChatGPT made Gen AI known and accessible to the masses, 65% of companies say their organizations are "regularly using Gen AI."
Fraudsters feel the same way, leveraging these advanced technologies to develop more sophisticated schemes, automate attacks and exploit vulnerabilities faster than ever before.
More specifically, Gen AI poses a threat to insurance providers because it allows fraudsters to quickly fabricate realistic and difficult-to-detect fake identities and documentation that can be used to carry out fraudulent activities.
Among the most troubling developments is the evolution of familiar types of fraud, such as synthetic identity fraud (SIF) and phishing.
For instance, 60% of insurers report seeing an increase in SIF at their organization, and 67% say they are concerned about SIF increasing in the future.
To be sure, SIF, phishing and fake documentation are not new tactics. However, Gen AI is taking them to another level, making implementing these tactics easier and more effective. A recent fraud report found that business leaders and decision-makers rank Gen AI (and the tactics it enables) as the most significant fraud trend over the next three to five years.
Awareness is the first step to fraud prevention. Understanding the potential dangers of Gen AI allows organizations to stay ahead of emerging threats, implement advanced detection methods and adopt a multilayered approach to safeguard against the evolving fraud landscape.
Account for Omnichannel Fraud
Fraudsters are looking to exploit customers where they are, making mobile and online channels the top targets.
However, fraud isn't just a mobile problem. It's increasingly cross-channel, so contact centers and in-person channels can't be ignored.
In response, insurers need to cultivate a holistic, multilayered approach to identity verification to effectively mitigate the threat of fraud on connected systems of online and offline channels.
With a multilayered approach to identity verification, insurers can effectively balance security with customer expectations for an experience that builds trust, deters fraud and increases revenue.
As a result, more than three-quarters of decision-makers say that identity verification can be a strategic differentiator, allowing them to outpace the competition in fraud prevention and customer experience.
See also: Deepfakes: An Emerging Cyber Threat
Collaborate to Maximize Impact
Fraud moves fast, and Gen AI and other technologies are only accelerating its evolution. This makes it more likely that bad actors will do more damage faster across industries. A single insurer's database provides a limited view of wider fraud activity and behavioral trends.
To stay one step ahead of the fraudsters, the insurance sector must collaborate with cross-industry intelligence consortiums to better evaluate risk and remain competitive.
In total, 81% of companies think cross-sector identity intelligence sharing and collaboration can be a strategic differentiator when combating fraud.
By combining insights from multiple commercial and government sources, insurers are best positioned to authenticate genuine customers and spot fraud signals or suspicious identities.
Simply put, fighting fraud is a team effort. Insurers that want to stay ahead of fraudsters and maximize the customer experience will collaborate to share intelligence, leverage broader data ecosystems and adopt unified strategies that enhance fraud detection while streamlining the customer journey.
Security and Customer Experience Without Compromise
For the insurance sector, fraud is becoming more common, sophisticated and consequential.
Insurers face a difficult challenge. They must protect against increasingly sophisticated fraud attempts while also delivering seamless customer experiences.
That's why the future of insurance belongs to companies that can turn the fraud prevention challenge into an opportunity for customer excellence.
