In many ways, the advent of digital technology is one of the great contradictions of our time. After all, few can argue with the fact that the proliferation of digital technology has empowered an entire generation of entrepreneurs, while it has also created new threats and challenges that have caused untold damaged to business ventures across the globe.
Nowhere is this enigma more evident than in the insurance sector. Here, insurers have been able to enhance the service that they deliver to customers on the back of technology, while the increasingly sophisticated use of metadata and statistics continues to help in the fight against fraud.
At the same time, it has never been easier for fraudsters to leverage technology to make false claims, including scanners and printers that can quickly produce fake receipts or documents to support their activities.
The Scale of the Problem and its Impact on the Industry
There is no doubt that this has increased the scale and cost of fraud in Australia, with the problem growing incrementally worse with every passing year. In fact, the Insurance Fraud Bureau of Australia (IFBA) claims that it is continuing to fix its sights in professional, organized fraud, which costs the nation's insurance industry an estimated $2 billion per annum. Technology is at the heart of this issue, with insures keen to maintain a proactive approach and leverage new innovations to stay on step ahead of fraudsters and potential cyber-thieves.
It is also important to note that the cost of fraud is not only being felt by insurers. This should not necessarily come as a surprise, with providers increasingly keen to share the cost increases caused by fraud directly with customers in order to minimize losses. Industry heavyweights IAG claimed that it has seen a 30% spike in suspicious claims during the last 12 months alone, while compulsory, third-party claims rose by 39% during the same period despite a noticeable drop in the number of road casualties.
With a high volume of these suspected to be fraudulent, customers have seen an increase in the cost of their premiums. This is a common industry phenomenon known as insurance shock, when premiums for all type of cover rise incrementally each year in order to offset higher levels of risk and potential losses.
What Can the Insurance Industry Learn from Other Sectors?
While advanced cyber-theft and malware attacks are a concern for all sectors, the insurance industry suffers because it is relatively simple for individuals to make fraudulent claims. After all, highly-evolved printers and scanners are easily accessible in the modern age, making it easy for fraudsters to replicate receipts or documentation to support their efforts. So unless service providers have adequate coverage or have taken proactive steps to leverage technology (and particularly channels such as social media) to identify suspicious claims, they remain susceptible to fraud.
In this respect, Australian insurers could do worse than learn directly from the financial and entities such as the IG online trading market. After all, these resources are extremely well-secured, with 128-bit encryption designed to repel even sophisticated malware attacks and safeguard online fiscal transactions. This level of security makes it exceptionally difficult for opportunistic thieves or fraudsters to gain any kind of foothold, while deterring anyone who is not part of a sophisticated and advanced network that has access to significant resources.
If insurers in Australia can take further steps to safeguard their websites and continue to leverage data in a way to helps with the further identification of fraudulent claims, they can achieve similar results and significantly relieve the burden on the industry (and its customers!)