The latest developments across the P&C insurance industry regarding fraud, risk and compliance.
13 March 2018

Identity Fraud – Automated Detection Systems Protect Both Insurers and Citizens

Whatever you do in life and no matter how careful you are with your personal details, it can happen to everyone: identity fraud. Like Alf Göransson, chairman of the board of the Swedish security firm Securitas. He didn’t find out his identity had been stolen until the court in Stockholm declared him personally bankrupt. It emerged his personal details had fallen into the hands of criminals and they used them for months, undisturbed. It wasn’t until a loan taken out in Göransson’s name was not paid off that the identity theft came to light.

Identity theft on the increase

credit card fraud

How exactly these criminals got hold of Alf Göransson’s personal details is not clear. But what is clear is that he’s not the only person to experience this. Around the world, the theft and subsequent misuse of personal details are on the increase. In 2016, 15.4 million Americans were hit by identity theft. That is 2 million victims more than the year before. They suffered losses to the extent of 16 billion dollars. It’s a major problem in Europe too. In 2017, 5.7% of adult Dutch people were a victim of identity fraud one way or the other. Two years befor, in 2015, the figure was 3.4%. In England, about 90,000 cases of identity theft were registered in the first half of 2017. Most of them took place on the Internet. Criminals pose as someone else in order to steal money, buy goods or to take out a car insurance.

Identity fraud undetected for a long time

A lot of people don’t even realise they are victims of identity theft. Often, they don’t find out until the bank or credit card company contacts them about ‘suspicious account activity’. In other cases, the theft is not discovered until people start receiving unexpected invoices or demands. Sometimes, there are months between them.

Car insurance taken out with stolen identity

identity fraud ghost brokingIn the UK, nearly 2,500 cases of identity fraud in connection with motor vehicle insurance were discovered in the first half of 2017. The year before, that figure was less than 100. This sharp rise may indicate that insurers have improved their risk detection methods. At the other hand, it could also mean that the number of attempts is also rising sharply.

In the past, an applicant often manipulated his own details to try and get (cheaper) insurance. These days, a lot of fraudsters use potential ‘gaps’ in the checks conducted by insurers. They pose as ‘regular drivers’, whereas the policy is in the name of a unknown yet existing person who resides in a low-risk area. It may take a long time for the identity theft to come to light. In the case of a loss event, the unsuspecting policyholder has a big problem.

Ghost broker

A fairly new phenomenon that has been detected in various countries is false car insurance sold via a ghost broker. So-called insurance brokers offer cheap car insurance, often via social media. The policies are often obtained from legitimate insurers using false details and are then edited and sold. The owner of the vehicle thinks he is insured. In reality, he does not appear in the register of the insurance company. In the case of a loss event, the consequences can be dramatic.

Information easy to obtain

social media posts identity fraudIn order to be able to carry out this kind of fraud successfully, criminals need personal information such as name, date of birth, address, bank details, passport number and credit card details. It is quite easy to get those details and there are various ways to go about it. Using the mail box, for instance. They steal post from the bank and copy the details. By hacking e-mail or by buying stolen personal details on the Dark Web.  Some people do make it very easy for criminals by sharing every detail of their private lives on social media.

There are known cases of people who became victims of identity fraud after sharing a photo of their new credit card on social media.

Quick acceptance demands automated screening

A lot of car insurance is taken out online. The applicant expects an immediate decision about the acceptance. From a commercial point of view, the company wants to comply with this. With such speed and commercial pressure, there is a high risk of certain screening steps being skipped. With well-organised automated risk analysis and fraud detection, the chances of fraudsters getting into the portfolio become considerably smaller. At the same time the application can still be processed quite fast. All kinds of relevant details can be verified in real time; are the applicant and the owner the same person? Does it concern a ‘regular driver’ and how is he connected to the applications? The screening result directly contributes to the result of the cobined ratio. It prevents the company from gaining a reputation as ‘an easy target’. Finally, it helps to prevent innocent citizens from becoming victims of identity fraudsters.

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