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The insurance industry has been widely known as being a central focus for fraud in a digital environment. With all the improvements and the forced transition to fully digital interactions, is that still the case in 2022?
Or perhaps more importantly, does the risk of online fraud need to still be a concern or are there ways to tackle it in combination with other common challenges faced by insurance companies in the customer onboarding process?
Even in a digital world, with many companies starting to offer an online experience for insurance policyholder applications and claims, a variety of challenges still plague insurance companies looking to streamline this process.
The most common, or at the very least the most obvious issues that hinder smooth, fast onboarding for insurance businesses include abandonment of the application process, adhering to the strict regulatory compliance requirements, and battling fraud in onboarding.
The rise of online fraud
The insurance industry is not known for smooth sailing in general, though recent startups have tried new, more agile approaches to a traditionally tedious and lengthy onboarding procedure. While more established companies work to keep up, the covid-19 pandemic forced many to hastily move processes online without the right solutions in place.
With the rising move to the online space due to the pandemic, online fraud has seen equivalent growth in several main industries. The top four with the biggest increase are: travel, gaming, finance, and insurance, respectively.
A study by TransUnion showed a jump of 54.3% from 2019-2021 in suspected fraud in the insurance industry is a clear example. In particular, application fraud increased 38.4% in the same period.
Online fraud and application abandonment
Long have insurance companies dealt with application abandonment. Often requiring long, detailed, and sensitive information to be disclosed in the process, many customers have given up somewhere along the way in the onboarding journey.
There was hope that technology would help improve this process - to tailor the forms to require only the details pertinent for that particular customer and make it faster and more accessible than paper-based applications.
However, buggy systems, unclear instructions, and a lack of customer confidence in data security have led to continued high rates of abandonment. In the TransUnion report, 89% of customers would choose a process based on clear security measures and ease of use.
Online fraud and regulatory compliance
It’s arguable that a company’s ability to meet regulatory compliance is clearly incompatible with any forms of online fraud. Fraud impacts both the consumer and the business side. From the consumer, they want to see a business with high levels of digital trust and feel secure that their information is safe.
From the business side, the customer needs to provide truthful, detailed information in order to be offered the proper policy terms. Insurance companies need to safeguard against the risk of application fraud in the onboarding process to prevent risk of noncompliance.
This means that certain measures need to be built-in to the customer onboarding in order to verify the identity of the applicant, provide the relevant policy, and also meet regulatory compliance requirements.
Is there a solution to online fraud for insurance companies?
The challenges surrounding online fraud in the insurance industry may seem daunting, but there are solutions available that can be implemented quickly and easily to work with existing systems and help to tackle fraud before it becomes a problem: in the onboarding process.
A solution like Taktikal includes tailored online forms, authenticated electronic signatures, and activity logs for every document, and more features that are available and easy to implement.
By helping to ensure the applicant is who they say, gathering only the necessary information, and tracking the actions taken on that document, this addresses the concerns around security and identity verification, helps to reduce the chance of abandonment, and allows for tracking to ensure compliance in every step means that online fraud can be dealt with by any insurance company looking for the right solution.