Navigating the landscape of identity fraud in insurance
Understanding the Difference:
Synthetic Identity Fraud vs. Identity Theft
Identity theft occurs when a fraudster uses real personal information (such as a name, date of birth, and other details) to open accounts, make transactions, or file claims with falsified documents. The victim of identity theft often faces real-life consequences as their legitimate identity is exploited.
Synthetic identity fraud, however, presents a unique and complex challenge. It involves the creation of an entirely fictitious identity by blending real and fabricated information. For example, a fraudster might use a legitimate date of birth and address but combine them with a fictitious name.
This synthetic identity can then be used to apply for insurance, file fraudulent claims, or manipulate quotes. The lack of a direct link to a real person makes it harder to detect and mitigate.
In a recent roundtable discussion with Insurance Post, participants highlighted the difficulties insurers face in distinguishing synthetic identity fraud from traditional identity fraud.
While synthetic fraud may seem like another form of ID manipulation, it often involves a sophisticated process of constructing a completely new identity, making it a more intricate threat to address.
Quote manipulation and insufficient identity checks
Another challenge discussed in the roundtable was quote manipulation. Fraudsters (or even well-informed customers) may alter personal details, such as changing their occupation or tweaking their address, to secure a more favourable insurance quote. While not always an example of synthetic identity fraud, this practice poses risks for insurers who lack comprehensive identity verification (IDV) processes.
Insufficient IDV checks at the point of quote or sale create opportunities for exploitation. Fraudsters can take advantage of these gaps, leading to issues such as chargebacks and fraudulent claims. Strengthening IDV processes ensures that insurers onboard only verified individuals and linked bank accounts, reducing exposure to fraud and enhancing trust in transactions.
Enhancing fraud prevention with innovative solutions
ThreatMetrix®
This powerful tool can help insurers assess the risk associated with a device, email address, and other digital footprints.
Even when a customer manipulates their identity details to alter a quote, ThreatMetrix® can identify suspicious patterns and detect whether the device and digital identity match previous interactions.
This can prevent fraudsters from using synthetic identities or engaging in quote manipulation without being flagged.
TraceIQ®
This tool enables insurers to quickly trace and verify identity information, helping to identify discrepancies in data.
Whether validating a customer's address or date of birth, TraceIQ® can play a critical role in spotting abnormalities before they result in a fraudulent policy or claim.
IDU®
IDU® delivers powerful identity verification and authentication, helping insurers ensure they are dealing with legitimate customers.
With IDU®, insurers can run comprehensive ID checks reducing the risk of onboarding fraudulent identities
Bankers Almanac® Validate™ Safe Payment Verification
This solution is critical for validating bank accounts associated with policies.
By integrating Safe Payment Verification into their fraud rules, insurers can ensure they only onboard customers whose bank accounts can be validated, preventing synthetic identities from slipping through.
The importance of bridging fraud detection
A key takeaway from the roundtable discussion was the growing recognition that fraud prevention must be integrated across the entire insurance journey - from the point of sale to the point of claim.
As noted, many insurers are working to bridge these two stages, ensuring that fraud checks are consistent throughout the customer lifecycle.
By doing so, insurers can prevent fraud at the earliest possible stage, reducing the need for costly investigations and chargebacks later.
As synthetic ID fraud evolves, insurers must stay ahead with advanced prevention solutions
Products You May Be Interested In
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ThreatMetrix®
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TraceIQ®
Powerful trace and investigation software
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IDU®
Identity management platform for verifying and authenticating an individual’s identity.
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Bankers Almanac® Validate™ Safe Payment Verification
Stop misdirected payments and protect against app fraud by verifying the identity of payees globally
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