Sophisticated online insurance fraud skyrockets with online, mobile transactions

Online fraud complications will soon emerge for insurance companies due to an increased interest in mobile apps and online insurance transactions, announced iovation and TransUnion at InsureTech Connect 2019, after looking into industry fraud data and the development of new fraud schemes.

U.S. consumers increasingly choose digital platforms for multiple operations, including for their relationship with insurance companies. An extensive investigation of some 10 billion global online transactions showed that between September 2018 and September 2019, 9.14 percent of insurance industry-related transactions were “risky,” as compared to 5.09 percent in other industries.

According to global market intelligence agency Mintel, barely 9 percent of U.S. consumers used a mobile app for health insurance interactions in 2017, however, just a year later, a whooping growth to 25 percent were registered. The same figures state that in 2019, the online insurance application process appealed to a quarter of millennials, and almost 30 percent of Gen Z respondents were attracted to using mobile tools for their insurance.

“The advantages of an online insurance offering is undeniable. It makes business processes more efficient and the consumer experience more convenient,” said Melissa Gaddis, iovation’s senior director of customer success. “However, as transactions move online, so will the fraudsters. With US consumers becoming increasingly comfortable transacting with insurance companies online, we expect new types of digital fraud to emerge here like they have in other parts of the world.”

The extensive use of mobile unavoidably leads to fraud challenges, the two companies warn. Some of these challenges include stealing an individual’s personal information to create accounts and open insurance policies for non-existent beneficiaries. The scheme of falsely applying for an insurance policy has gone up 516 percent among its customers in just three years, iovation claims.

Bad debt is another challenge, especially for auto insurance providers. The insurance company will live up to the end of its bargain, but it won’t get paid for the service because a bad check or a stolen credit card was used as payment.

Ghost Broking, also known as online third-party application fraud, has increased 139 percent among iovation customers between 2015 and 2018, the company says. Ghost broking is when scammers pretend to be an insurance broker – they buy insurance with fake credentials or documents and resell it to the innocent buyer.

Account Takeover is very common when life insurance is at stake, according to the research. An individual who is not insured on a specific policy will gain access to sensitive information or redirect claim payments to themselves.

Attempted online first-party claims fraud, which is up by 271 percent, is when the applicant lies about a claim, while attempted online third-party claims fraud happens when a pretend broker will apply for a false or exaggerated claim. The latter is up a relatively modest 63 percent.

Call centers are also targeted with social engineering attacks, once scammers collect personal data from social media or the dark web. Attackers manipulate them to hijack accounts or apply for new policies.

“Fraud is now top of mind for many insurance carriers, especially as digital engagement becomes more widespread in the industry,” said Mark McElroy, executive vice president and head of TransUnion’s insurance business unit. “As more prospective policyholders move towards using digital platforms, it’s incumbent on carriers to leverage all available tools to ensure they avoid fraud and keep costs down for both themselves and consumers.”

In 2018, iovation was acquired by TransUnion. Earlier this year, iovation released a series of updates to its online fraud prevention and authentication products to increase security for businesses while reducing friction for end-users. TransUnion and iovation insurance solution offerings combine iovation’s digital identity solutions that use device intelligence and TransUnion’s identity verification solutions.

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