KEY TAKEAWAY:
--Insurers can get ahead by embracing technology like digital identity verification that achieves a balance between rigorous fraud prevention and providing a great customer experience. Every insurance company should acknowledge that digital identity making its way into onboarding flows is not an if – it’s a when.
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As Canada's insurance landscape evolves, one issue that continues to loom large is a rising rate of fraud.
The pandemic drove an uptick in fraud across many industries, as digital-first transactions became the norm. But while other sectors have made strides in mitigating fraud since, the insurance industry has struggled to get a handle on the issue.
While the rate of digital fraud across all industries decreased nearly 19% year over year from Q2 2021 to Q2 2022 in the U.S., the insurance industry saw a 22% increase during the same period. While multiple dynamics play into these trends, a key reason lies in the existing customer experience standards in the sector.
Unlike industries such as gaming and finance, where a certain level of friction while onboarding is acceptable to prevent fraud, insurance providers face a unique challenge. The competitive nature of the insurance market revolves around speed –specifically, the need to quote and enroll customers quickly.
With "time to quote" a key metric for winning customers, insurers are reluctant to create extra steps that add friction, and fraud protection, in front of prospects. Ultimately, this is costing insurers.
One way insurers can get ahead of these challenges is by embracing technology like digital identity verification that achieves a balance between rigorous fraud prevention and providing a great customer experience. Thankfully, digital identity technology advances every year and can be leveraged to support both.
See also: How Technology Is Changing Fraud Detection
The true cost of fraud for policyholders
Health-insurance costs in the U.S. are climbing at the steepest rate in years, with some projecting the biggest increase in more than a decade. Costs for employer coverage alone are expected to jump by 6.5% in 2024, year over year.
Without technology in place to detect and prevent fraud, these costs are being passed on to policyholders through increased premiums. Over time, this undercurrent of rising costs will create challenges.
And it will certainly change the way companies compete. In today’s market, insurers that provide a good and fast quoting experience win. With little identity verification management in place, companies are optimizing for a two-minute verification process. This lean process often results in fraudulent claims being filed, or inaccurate information being updated for better rates.
As cost and fraud trends spike, tomorrow’s competitive advantage will go beyond the traditional speed to quote. Insurers will also need to assure customers of robust measures to reduce fraud, protect identities online and ultimately keep rising premiums at bay.
See also: Using AI to Prevent Insurance Fraud
The power of digital identity
Insurers can address these challenges through digital identity verification, which uses digital credentials to analyze and verify personal data, while keeping the ownership in the hands of the user. By incorporating digital ID verification into the policy application process, insurers can maintain a streamlined onboarding flow while customers can feel more confident that their information will be kept safe.
Every insurance company should acknowledge that digital identity making its way into onboarding flows is not an if – it’s a when. At the federal level, the Digital ID & Authentication Council of Canada (DIACC) is advocating for a secure, interoperable digital identity for Canadians. On a provincial level, policy makers are working to support the adoption of digital credentials across levels of government and industry.
With technology intended to roll out across Canada, there will be a first-mover advantage for organizations that lean into digital ID technology. Making it a priority to lead with a streamlined customer experience, reduce fraud risks and ultimately cut operating costs will create a competitive advantage.
For insurers new to digital ID technology, a great place to start leaning in is by taking a look at open standards-based technology. As digital identity is still in its early days in Canada, you’ll want to explore products that are built with the capability to facilitate credentials that allow the technology to work across various networks. By building with open standards, you’ll decrease the likelihood of larger expenditures later, thanks to standards set by DIACC’s Pan-Canadian Trust Framework.
The rise of fraud in the insurance sector is calling for a paradigm shift. The power behind digital identity technology is no longer just nice to have – it offers a lifeline for an industry at a crossroads.
The future of insurance affordability hinges on its ability to adapt, innovate and harness the capabilities of digital identity technology to create a more secure and supported industry.
