Understanding synthetic ID fraud in the UK insurance industry
The growing threat of synthetic id fraud
In the latest Insurance Fraud Survey Report, released Autumn 2024, identity fraud has emerged as the most challenging fraud typology to detect. Notably, 72% of respondents now rank it in their top three most difficult fraud types, a significant increase from 32% last year. This surpasses both professional/organised claims fraud (53%) and opportunistic fraud (44%).
Charlotte Gray, Claims Manager at QBE, highlighted how digital fraud has surged post-Covid and amid the cost-of-living crisis. The decline in physical opportunities for fraud has led to an increase in sophisticated techniques like number spoofing and shallowfakes. Fiona Reeve, Head of Fraud at Ageas, also noted the growing threat of synthetic ID fraud, exacerbated by advancements in AI and the proliferation of phishing attacks. The problem here is that these issues are harder than ever to detect, and insurers are struggling to keep up the pace with fraudsters.
Synthetic ID fraud involves creating fake identities by combining stolen personal data with fabricated details (or entirely fabricated). This form of fraud is challenging to detect and has significant financial repercussions. Over two-thirds (66.7%) of survey respondents view synthetic ID fraud as extremely or very significant, emphasising the difficulty in distinguishing legitimate from synthetic identities and the rapid evolution of fraud techniques.
A deep dive into synthetic ID fraud
Here's the unnerving part: these fabricated personas can appear completely genuine, making them incredibly difficult to detect.
Our latest white paper, Synthetic Identity Fraud in the UK, delves deeper into this complex issue. It explores the methods fraudsters use to create these synthetic identities, the types of insurance fraud they commit, and the significant financial impact on insurers and legitimate policyholders.
Unveil the tactics of fraudsters and protect your business
Synthetic Identity Fraud in the UK goes beyond the surface to explore the intricate methods used by fraudsters to create these synthetic identities.
Discover the various types of insurance fraud they perpetrate, and the substantial financial burden imposed on insurers and legitimate policyholders. Empower your organisation to combat this growing threat by downloading the white paper today.
Red flags to watch out for:
- Inconsistent information: Discrepancies between different data points, such as addresses, phone numbers, or dates of birth, can be indicative of a synthetic identity.
- Unusual address patterns: Addresses that are associated with multiple individuals or are in high-fraud areas should raise suspicion.
- Lack of credit history: Synthetic identities often lack a credit history, as they are newly created.
- Suspicious online behaviour: Unusual patterns of online activity, such as excessive account creation or rapid changes in spending habits, can also be a red flag.
Synthetic ID fraud is rapidly rising within the UK insurance industry, driven by advanced technologies and growing economic pressures.
LexisNexis® Risk Solutions data reveals that nearly three million identities in the UK exhibit multiple high-risk factors, and hundreds of thousands more are created annually. Without intervention, this trend could cost businesses over £4.2 billion in the next three years.
Understanding this emerging risk at a national level
For a deeper dive into synthetic identity fraud and its impact, be sure to watch Hidden in Plain Sight: Synthetic Identity Fraud – a talk from Trust:Live earlier this year. In this talk, Dr. Jeffrey Feinstein, Global Head of Data Science, and Jonathan Clarke, Head of Data Science, break down the lifecycle of a synthetic ID and the significant disruptions it can cause within industries like insurance.
They explore the increasing sophistication of fraudsters, and the evolving strategies used to stay ahead of traditional detection methods. The video also provides practical insights on detecting synthetic IDs, from identifying key warning signs to understanding how fraudsters manipulate common detection systems.
With the right data and analytics tools, organisations can recognise synthetic identities in near real time, reducing their exposure to fraud.
“These identities aren't trying to be found. These [identities] are trying to hide. The only person who knows this is fraud is the fraudster themselves. And they're not going to phone you up and tell you. Many organisations may not know [fraud] is existing, because nobody is shouting about it. No one's actually telling them there's a fraud going on.”
Proactive measures for prevention
To effectively combat synthetic identity fraud, businesses should:
- Strengthen identity verification: Employ rigorous processes to validate customer information.
- Implement continuous monitoring: Proactively track accounts for suspicious activity and respond promptly to anomalies.
- Train employees: Equip staff with knowledge of fraud indicators and empower them to report potential cases.
- Prioritise data security: Safeguard customer data from unauthorised access and breaches.
By adopting these measures, businesses can enhance their ability to detect and prevent synthetic identity fraud, safeguarding their financial interests and protecting customer information.
Solutions for combatting synthetic ID fraud
To tackle the challenges posed by synthetic identity fraud, LexisNexis® Risk Solutions offers several powerful tools:
LexisNexis® ThreatMetrix®
This solution leverages advanced analytics and machine learning to help identify and mitigate fraudulent activities, including synthetic identities.
LexisNexis® FraudPoint™ UK
LexisNexis® FraudPoint™ UK uses predictive analytics and public records data to help organisations detect and prevent identity fraud by identifying suspicious patterns and behaviours that indicate potential fraud risks.
LexisNexis® Bankers Almanac® Validate™ (Safe Payment Verification)
An additional layer of security that enhances transaction validation to prevent fraudulent activities.
LexisNexis® IDU®
This tool provides comprehensive identity verification and fraud detection capabilities, crucial for helping to identify and mitigate synthetic ID fraud.
These solutions, combined with layered verification, authentication, and fraud insights, offer a robust approach to building a comprehensive view of identity risk and protecting against fraud. Additionally, the LexisNexis® Digital Identity Network, a cross-industry consortium, enhances security through shared fraud intelligence.
We proactively monitor synthetic ID hotspots and emerging trends to enhance our detection models, identifying synthetic identities in real time.
Given the growing threat of synthetic ID fraud, we offer a complimentary data retro analysis to help identify the prevalence of synthetic IDs in your database.
If you'd like to learn more or need assistance with anything mentioned in this article, please feel free to get in touch.
