Digital Fraud: How to Protect Your Claims?

The rise of digital fraud has become a pressing concern for all insurance professionals. Whether you’re a risk management director, claims manager, or any role in the industry, there is an ongoing threat to the security of our claims. Fraudsters are becoming increasingly sophisticated, using new technologies and tactics to exploit vulnerabilities in claims processes. In this blog, we’ll explore the various types of digital fraud, its impact on the insurance industry, and actionable steps you can take to protect your organization.

Digital Fraud in the Claims Process

Digital fraud in the insurance industry can take many forms, from falsified documents and identity theft to complex schemes involving cyberattacks and phishing scams. The use of digital tools by fraudsters has surged, often making it harder to detect and more costly to rectify.

Some of the most common types of digital fraud include:

• Identity Theft: the stealing of personal information to file false claims or impersonate claimants.
• Phishing: Attackers use fake emails or websites to trick employees into revealing sensitive information.
• Synthetic Fraud: Fraudsters create entirely new identities, often by combining real and fictitious information, to file fraudulent claims.
• Data Breaches: Hackers exploit vulnerabilities in claims management systems to access private policyholder information.

Higher Fraud Rates = Higher Premiums 

Educate Your Team

Phishing attacks remain a prevalent tactic for fraudsters attempting to breach sensitive claims data. Educating your claims management team on how to spot and handle phishing attempts is critical. Encourage staff to verify any unsolicited requests for information and to be cautious about clicking on unfamiliar links.

By providing training on cybersecurity best practices, you can significantly reduce the risk of falling victim to phishing scams. Implementing email filtering software that detects and blocks potential phishing emails can further reduce this risk.

Regularly Audit Your Claims Process

Routine audits of your claims process help identify weak points in your system that fraudsters may exploit. Regularly reviewing your organization’s digital infrastructure, data storage methods, and claim handling procedures ensures you stay compliant with regulations and industry best practices.

Audits also provide insight into how fraud prevention strategies are performing. Identify where potential improvements can be made, and adjust your fraud prevention tactics accordingly.

One in 10 insurance claims contains some element of fraud. And annually, insurance fraud steals at least $308.6 billion from American consumer. (Verisk 2023)

Invest in Cybersecurity Solutions

A cybersecurity strategy is the cornerstone of protecting against digital fraud. Cyberattacks on insurance companies are increasingly common, and without the proper security protocols in place, your organization’s data could be vulnerable.

Adopting SOC 2 Type II certification standards for your claims management system is one of the best ways to ensure your data is secure. These certifications provide an industry-standard framework for securely handling sensitive customer data. Additionally, using encryption to protect claims data, both in storage and during transmission, minimizes the risk of data breaches.

Ensure your team stays up-to-date with the latest cybersecurity technologies and strategies. This may involve consulting with cybersecurity experts or investing in software that monitors your system for vulnerabilities.

Here is a summarized set of steps to protect your claims against digital fraud:

Validate the time and location a photo was taken is appropriate for the loss

• Confirm the photo didn’t come from the Internet
• Confirm the image hasn’t been used before
• Confirm no evidence of receipt or documents manipulation
• Ensure the image hasn’t been modified

Sources:

1. Coalition Against Insurance Fraud. (2023). Insurance Fraud. https://www.insurancefraud.org
2. SOC 2 Type II Certification Standards. (2023). AICPA. https://www.aicpa.org
3. Insurance Journal. (2023). The Rise of Digital Fraud in Insurance. https://www.insurancejournal.com