Is your risk detection keeping pace with fraudulent behaviour?

July 16, 2015 Adrian Coupland

While application fraud is a key priority for 67% of insurers according to the Insurance Fraud Survey 2015, only 22% felt they were dealing with it successfully. Perhaps it is hardly surprising then that SSP analysis revealed customers who deliberately manipulated their risk data when looking for motor insurance quotes cost the industry a potential £1.42 billion in lost premiums.

Despite these huge losses, many insurers are coming up against a number of barriers in their fight against pre-inception fraud. One of the major issues they face is being able to identify the activities and actions of dishonest individuals who are not known criminals, so that their applications can be flagged up for further investigation.

The extent of this challenge was highlighted by SSP data, with one particular customer significantly manipulating their information during the course of 77 quotes. As a result, their premium was halved before the policy was converted by an unaware insurer.

That's why we are delighted four customers are now using the SSP Verify solution. This allows the behaviour of individual customers to be captured and monitored in real-time across the whole insurance market, providing sophisticated insight into when application fraud is occurring.

Of course, there is a broad spectrum of human behaviour, which makes it important to spot the difference between honest mistakes and intentional data manipulation. That's why we have designed the solution so that the rules can distinguish a potential typo from 70-odd quotes with multiple changes. In addition, it can be configured to reflect an individual insurer's tolerance to application fraud.

This level of understanding means the early adopters are able to improve their underwriting results by identifying the segment of problem customers who are paying substantially inaccurate premiums – and who are more likely to make a claim.

Having this acumen also ups the ante for other insurers. As the early adopters can focus on their quality clients and avoid the administrative headache of removing customers who fail post-inception checks from their books, the laggards risk being left with the business that no one else wants to write.

Despite the inherent dangers this poses, most insurers are still slow to embrace change. I am always surprised by the length of the adoption cycle for truly innovative data products and services that enable firms to write good business on the right terms. Looking at the simple logic, this means all the suspect business is passing back into the market, which can't be good news for non-adopters.

The picture becomes even bleaker for those who are slow to adopt when you consider fraudsters are becoming more sophisticated in the way they manipulate their data. They have realised that mobile devices such as smartphones use GPS tracking, so their location is no longer a secret. In addition, they may have already been caught out by the heighted governance and validation for NCD.

All of this awareness has enabled customers to become skilled at identifying the criteria that are not as easy for insurers to check. For example, there are no shared databases where vehicle usage can be validated – yet SSP Verify is able to handle this evolving behaviour.

This is reflected in the top five consumer tricks picked up by SSP data at set times in May 2014 and February 2015:

May 2014

February 2015

1

Vehicle kept overnight location

1

Vehicle usage

2

NCD

2

Occupation

3

Mileage

3

Mileage

4

Occupation

4

Vehicle kept overnight location

5 =

Claims

5

NCD

5 =

Convictions

 

 

As can be seen from the table above, the details that are much harder to verify have come to the fore in recent months.

Although we mentioned earlier the importance of differentiating between honest mistakes and deliberately fraudulent behaviour, the nature of the latest top five makes it unlikely that they reflect genuine errors.

Subsequently the current SSP Verify users will feel that they have got in just in time to tackle changing policyholder behaviour, and so have been able to gain a significant first mover advantage over firms that have yet to adopt such a solution. 

If you would like to strengthen your fraud defences by becoming part of the technology evolution, then we'd be keen to talk to you.

About the author

Adrian Coupland

Adrian joined SSP in 2005 and has over 20 years’ experience in the market across broking, distribution, business development and technology. After 15 years in the broking industry, ten of which were with A-Plan, Adrian has spent the last 11 years at SSP. As Customer and Marketing Managing Director, he is part of the executive team, and his expertise in data and innovation ensure SSP's customers are at the leading edge of advancements in the insurance industry. Adrian has been instrumental in developing SSP's real-time pricing and telematics strategies and shaping its data strategy across all territories.

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