The insurance industry has been notoriously slow when it comes to change, specifically around adopting new technology within their organizations. There are many reasons for this, including a lack of budget, a “this is how we’ve always done it” mentality, and overburdened resources.
Despite this, the insurance industry needs to take aggressive action to get ahead of rising fraud rates to protect themselves and policyholders.
According to a June 2020 report by Tink, 41% of financial executives believe the digital shift caused by Covid is permanent. Furthermore, 65% of financial executives across Europe believe banks need to increase their speed of innovation. However, despite growing popularity and interest in open banking, its success, dependent on full adoption, is in question due to lack of understanding. For banks to effectively integrate into the financial infrastructure, the awareness gap needs to be addressed before transitioning into an economic norm.
In terms of technology adoption, the pandemic changed everything. Insurance companies that had started their digital transformation prior to Covid were ahead of the game, but others were forced to develop a quick digital strategy to stay competitive.
Moving an organization through a digital transformation brings several challenges, including the enormous threat of fraud. There are two main areas of concern: when a consumer completes a new policy application and account takeover (ATO). Both have become very prevalent over the past decade for the following reasons:
- The number of data breaches is increasing across all industries.
- The insurance application process is reliant on the consumer to provide personally identifiable information (PII).
- With the amount of personal data insurance carriers collect, organized fraudsters look at the insurance industry as a viable target.
According to the Identity Theft Resource Center's 2021 Data Breach Report, there was a 68% increase in data breaches in 2021 – almost double the number in 2020. And cyber risk is the top concern for more than half of financial services CEOs surveyed.in PwC’s 25th Annual Global CEO Survey.
How can behavioral biometrics help insurers tackle fraud head-on?
Behavioral biometrics is a great method insurance carriers can digitally deploy to identify and intercept many of these issues. Behavioral biometrics technology sits behind mobile applications and websites to provide insight into user patterns and behaviors. It’s also an effective method to verify a consumer is legitimate and not an imposter or fraudster. Behavioral biometrics can be utilized to block suspicious transactions from occurring based on a business’s fraud strategy.
Behavioral biometrics starts capturing information once a user activates an app or visits the company website. Their profile is developed over every session and across channels. How the user types, their mouse movements, the pressure used on a mobile device, and much more is compared to that profile. Artificial Intelligence (AI) and machine learning are then used to detect if a new user is a real person or a bot.
The technology enables insurance organizations to safeguard against the bad guys while providing a seamless experience to their end users. It works well with many other technologies and enhances a company’s comprehensive fraud strategy.
Why should an insurance company incorporate behavioral biometrics into their digital fraud strategy?
- Create less friction and provide the consumer with a better customer experience
- Add an additional security layer to detect unusual signals during policy applications or within a current customer’s session
- Provide the opportunity to intervene on fraud in real-time versus downstream when the fraudster starts to file fraudulent claims
- Protect policyholders, stockholders, and the company’s bottom-line from organized fraudsters
- Save millions in lost revenue due to fraudulent claims
Behavioral biometrics can detect the use of bots
As many insurance companies have moved to a digital strategy for selling policies, many of their customers fill out applications via online or mobile apps. Bots can be used by a fraudster or a competitor to submit hundreds of policy applications. In both instances, it’s for financial gain. For the fraudster, they ultimately want to file fraudulent claims and reap the financial reward. The competitor is all about gaining competitive intelligence on how policies are rated in each territory or region for competitive intelligence and to potentially gain market share. In either case, behavioral biometrics will detect the bot and, based on internal rules that have been set by the company, can stop the application process (and the fraudster) in its tracks.
Behavioral biometrics can spot synthetic identity fraud
Another example is the identification of synthetic identity fraud during new insurance policy creation. Synthetic identity fraud is the creation of a fake persona using a combination of real, stolen, or manufactured PII. As the fraudster has completed the application process repeatedly, they’ll move very quickly through the various data entry fields. They may also copy and paste much of the information as a time saving measure or use expert keyboard functionality not normally used by a typical consumer. Behavioral biometrics will identify these unusual behaviors at the time the policy is being created, to catch the fraudster before the fraud.
Change isn’t easy. However, with a very competitive landscape and increasing risks in cybersecurity within the insurance industry, using digital technology such as behavioral biometrics becomes essential. With most consumers relying on businesses, including insurance carriers, to provide a great customer experience while protecting them from fraud, it’s no surprise many carriers are moving towards digital transformation. By providing less friction to detect fraud behind the scenes, it’s the best way to “have your cake and eat it too” – enabling insurance organizations to remain competitive and increase revenue.