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Digital ID can help curb rampant insurance fraud, says Azim Esmail of ATB Ventures

Digital ID can help curb rampant insurance fraud, says Azim Esmail of ATB Ventures

The insurance sector has a $308 billion problem. That’s what the industry is estimated to have lost to fraud in 2022, according to numbers from the Coalition Against Insurance Fraud. It is a problem that will only get worse unless it is addressed, which digital ID can help with, says Azim Esmail, head of Growth & Partnerships at ATB Ventures, the innovation arm of ATB Financial.

In an interview with Biometric Update, Esmail points to attack volumes as clear evidence that the issue needs more attention. Between 2021 and 2022 in Canada, digital fraud attempts declined across sectors by an average of about 37 percent; by contrast, during that same period, insurance fraud attempts exploded, increasing by a whopping 125 percent. Of all industries screened for the quarterly study from credit-reporting firm TransUnion, the insurance sector was by far the ripest in Canada for digital fraud. Globally, things were even worse, with insurance companies seeing a 159 percent increase in online fraud attempts from 2021 to 2022.

So why is no one fixing this? Azim Esmail says the answer is partly to be found in customer expectations about timing and efficiency.

“A lot of the solutions to date create a ton of friction around the onboarding experience,” says Esmail. “For insurance, for the last while the game has been, how quickly can we get to a quote and how quickly can we get someone signed up? Adding in more friction or more time around validating who that person is and what their claims are in that process of quoting is seen as challenging. You have two opposing viewpoints: the customer experience and driving sales versus fraud.”

There may be hesitation in uptake, but the numbers speak for themselves. The $308.6 billion in losses is spread across subsectors of the industry that touch many different areas of life. The largest areas, Esmail says, are “life insurance at $75 billion and property and casualty insurance at $45 billion.” An underlying thread across sectors is the use of misinformation — people claiming to be who they are not, or claiming things about themselves that are false.

Esmail and ATB Ventures believe a lot of that can be addressed with digital ID and information about a person that can be validated through better means than self-attestation. The challenge is how it fits into the user experience.

Opportunity for smaller firms to integrate digital ID for validated credential

By adding a little friction to the beginning of the customer experience, for instance in the form of registering a biometric credential, it could make the overall customer journey smoother by eliminating pain points further along in the process. “The key is selling the bigger picture about how this could evolve the insurance industry,” Esmail says. “People immediately go to ID verification. But it could be so much more than that. If you think about insurance certificates,  pink slips that people keep in their car… the idea of turning those into credentials, using those to reduce future friction, that’s going to be the key.” He describes a single validated credential that can be used across purposes for fast authentication.

Esmail says there is an opportunity for smaller, more digitally agile firms to integrate identity verification seamlessly into their services. He says the most common verification tool at present is document verification matched against a selfie, but he also points to the growth of bank account verification, and the emergence of provincial digital ID for authentication.

ATB Ventures has built a robust ID verification tool that combines document-based and bank ID verification with a provincially-based digital ID verification. According to Esmail, it is the first of its kind to leverage that trifecta to allow users to instantly create a trusted credential that expedites subsequent verification and can also be used for passwordless authentication on websites and apps.

“For a very long time, we have seen all of our data be owned and controlled, used and misused by third parties, and we have hit an inflection point on that,” says Esmail. He underlines the importance of trust in bringing power back to the customer and the citizen, where they truly own the data about them, and can share it on their terms.

“That kind of trust relationship is going to go from today, where it’s a competitive advantage for companies, to table stakes.”

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