The internet of things (IoT), data and digital advances are changing the insurance landscape and as an insurer we should be excited. However, just as the IoT brings new opportunities for us as an industry to assess risk, price more accurately and detect more fraud, it also gives fraudsters new creative ways to commit fraud against us.
So what is the IoT? It’s basically any connected device - be it a phone, a watch, a tablet, a fridge, a car or thermostat in your home. There are seven billion people in the world and three billion of us already use a connected device. Just take a minute to think about how many connected devices you have on you today, whether that is a phone, tablet or wearable device. Connected devices can provide us with great insight and we can get to know our customers better than we have ever done before. However, as with any new technology, IoT is bringing new opportunities as well as challenges. One of the challenges is the opening of a number of new vulnerabilities to fraud.
What’s clear from our data is that we’re seeing an increase in some fraud trends. Quote manipulation, ghost broking, identify theft and account takeover are all on the increase. Fraudsters are getting smarter, so much so that on some occasions they’re getting through front end identity and credit checks. Criminals are also able to use robotics technology to fire off multiple quotes in seconds until an insurer identifies the threat and blocks the device. Then the fraudster simply moves on to the next insurer.
False documentation and source coding is also a growing concern. Lots of insurers still request documentation to validate claims but we need to be aware. Source coding can be found on a simple YouTube search and it means any web based application such as an online account, bank account, pay/wage system and purchase receipts can be changed. The fraudster can print screen or print what looks like genuine documents.
While there are some issues, at the same time IoT does also allow insurers to stay ahead of the game. We can source data from databases in real-time, so instead of relying on customers to remember information and suspecting them if they make errors of memory, we can simply source the answers ourselves in real-time. Within a crash, connected devices can also help assess what really happened, whether that’s via an engine management system or telematics device. The IoT can track social media posts within a radius of an event to help validate extraordinary events such as a storm or flood.
The world is changing and as an industry we need to keep up. We need to be on the front foot by focussing on front end controls rather than waiting for that fraudulent claim to occur. We also need to learn how to use data in new and interesting ways - fail fast, learn from mistakes and improve. We must unlock the power of data analytics and machine learning to support our investigators to make better decisions. To achieve this, it’s imperative that we invest in the right tools.
Within LV=, we’re taking steps to protect our customers, our employees and our business from fraudulent activity. No one in our industry can afford to bury their heads in the sand, because fraudsters won’t.