By Robert Harris, Global Product Manager for Insurance Fraud at BAE

For an industry where data is king, it’s perhaps surprising that insurance wasn’t always the first to embrace new technology. If that was once the case, however, it’s certainly making up for lost time as digital innovation transforms business processes, creates new revenue streams and adds value for new customers. Yet at times of economic recession and hardship, fraudulent activity often spikes online. Insurance is no different — but here, it is often erstwhile legitimate customers that engage in desperate behaviours.

This poses a problem for insurers: how to spot the real from the fraudulent claims, without impacting the customer experience. Fortunately, technology is here to help.

The world turns digital

In Europe, the average person is said to interact with a device at least 30 times a day and smartphones up to 200 times. Younger technology users might exceed these figures before they’ve even finished breakfast. This is a challenge and an opportunity for insurers. These customers are more demanding than before: they’re asking for the same seamless experiences they get via online consumer channels. But for those able to match these rising expectations, there’s the potential to create new revenue streams and products, differentiate competitively, and win hearts and minds.

AI algorithms can be designed to analyse the vast troves of customer data collected by insurers to create more personalised policies and fairer pricing. Mobile apps can be designed help to improve the customer experience. IoT sensors on vehicles could be used to support usage based or demand-adjusted pricing, or even to alert the owner when a fault is developing, potentially saving the insurer on car repair costs. And much more besides.

A recent non-life survey by PwC across 16 countries found that two-thirds of consumers would be willing to have a sensor attached to their car or home, provided that the end result is a reduction in premium. This number increases to 76% for 25-34 year-olds.

Fraud steps in

Yet new digital channels can also provide new opportunities for fraud. On the one hand, the number of claims may be expected to fall during a pandemic like COVID-19. After all, people are making fewer trips in the car, foreign travel is virtually non-existent and most employees are furloughed or working from home. This might help save insurers money. But on the flipside, history tells us that during recessions, we can also expect an increase in dishonest behaviour.

In the motor insurance space this could take the form of an increased number of suspicious thefts and fires,

especially in households with more than two vehicles, or whiplash and other claims that can’t be verified face-to-face. In the home, expect an increase in house and garage fires, including expensive equipment, which are put out without the fire services being called. Or a sudden increase in the contents value, or mysterious disappearance of certain items like jewellery.

Insurance fraud during the pandemic may even stretch to false claims for telemedicine work that didn’t take place, or injuries caused when working from home. There may also be attempts by professional fraudsters to file compensation claims against companies about to go bankrupt. This makes it more difficult for the insurer to investigate or get the information they need to find out what really happened.

How tech can help

Fortunately, while fraudsters are taking advantage of digital channels, connected technologies can also help insurers to respond in kind. For example, interviews with the claimant are still an important part of the claims validation process in many cases. In a world under lockdown, insurers could use new tools such as voice analytics to conduct such interviews over the phone. The added advantage of these is that they can be programmed to both identify who the speaker is and whether their vocal behaviour sounds suspicious.

Among Special Investigative Units (SIU) new patterns of working are also emerging to take account of the fact that at-scene investigations, medical and home examinations and interviews may be difficult to facilitate. Fortunately, digital evidence is stepping up to fill the hole left by traditional offline methods to work out if a claim is valid or not. Digital technology that can identify photos and invoices, where they were taken and if they have been tampered with can not only help to root out fraud but also process investigations faster and more cost-effectively. Geospatial mapping and satellite imagery can also help, by providing investigators with a clear view of an accident or incident location.

Even the courts system is going virtual to clear the backlog of insurance fraud and other cases mounting up during the lockdown.

In a digital world, there is arguably more opportunity for would-be scammers to game the system. The economic hardship brought about by the pandemic could therefore be a testing time for many insurers. In this climate, those already invested in digital transformation will stand a better chance of spotting scams early on — weathering the storm and minimising the impact of a COVID-19 fraud spike. Technology is here to help, during the pandemic, and beyond.