Types Of Insurance Frauds In 2022 And Ways To Prevent It

The Emergence of innovative technologies has become a major turning point for how financial institutions operate today. From banking to the transaction process, every domain of the fintech industry is evolving like never before, providing us with a more efficient way to access our financial information and needs. Fintech conferences such as Money 2.0 Conference say that insurance is one of the most contributing factors to fintech, having a global market value of $5.9 billion.

A few years ago, insurance companies were operating manually and limited to geographic boundaries without any online presence and technologies. This equation is totally opposite today, and the services which felt like a dream yesterday, are our present-day reality. While many industrialists have made a fortune out of this multi-billion dollars industry, it is also becoming a hub for scammers and fraudsters to do fraudulent activities and thug people. This rapidly growing industry will cover millions of people in the future. So it’s essential to be aware of the online industry’s scams and how we can prevent them.

Defining Insurance Fraud

Insurance fraud happens when an unauthorized individual or company offers you an insurance policy by promising you to provide insurance coverage in return for your money but offers you nothing. These people claim to be authentic insurance providers, but their only motive is to perform fraudulent activities and steal consumers’ personal information. According to the digital insurance conferences, offline insurance frauds are repetitive and more accessible to identify and track than online frauds. Advanced technology has given cybercriminals the advantages of performing scams in different ways, which can sometimes be challenging to trace.

Soft And Hard Insurance Fraud

When we talk about scams, it is not always the consumers who get exploited, but the insurance companies are also not safe. When an accident, theft, or injury is pre-planned in order to take advantage of insurance companies, it is referred to as complex insurance fraud.

Soft Insurance fraud is more common and occurs when a policyholder demands or exaggerates a claim on non-existing items. For instance, a consumer demanding a claim for a stolen mobile phone but also asking for returns for the accessories which are not legitimate.

• Different Insurance Fraud

Though there are numerous insurance scams if we look from the perspectives of a consumer and business owner. We will look into some common ones:-

• Material Misrepresentation Fraud

These are the most common fraud cases globally. When consumers don’t provide legit and proper information while filing a claim, it is referred to as material misrepresentation or application fraud. A claim application form comes with an appropriate evaluation process, and hiding or misleading information will disturb the evaluation process and cost the organization a lot of money.

• Intentional Damage Scams

The second-biggest category of insurance fraud is where a policyholder intentionally damages a commodity to claim insurance. These fraudulent acts are done with selfish motives to take advantage of the insurance companies, leaving them in vulnerable situations. This form of fraud is increasingly frequent in the area of insurance-as-a-Service or digital insurance. Fraudsters buy two identical things (such as the same model phone) and insure just one. They then injure the second and use it to support their allegation.

• Fake insurance provider fraud

Whether it’s online or offline, another commonly performed scam where fake individuals or companies claim themselves to be authentic insurance providers by copying the brand image of other companies. These fraudsters provide you with fake policies and claim applications to get your personal information. They offer you too-good-to-be-true schemes which can make you fall easily for these traps. Consumers not having enough knowledge of insurance policies and technologies are most likely to fall victim to these scams.

• Fake Events Scams

When an insurance holder depicts a fake event like theft or murder to take advantage of the insurance policy for selfish motives by adopting illicit methods, these scams are usually more minor in numbers. Still, they can cost the insurance provider a lot of time and money.

• Exaggerated Claims Scams

It is a bit difficult to verify claims for insurance companies because many insurance holders exaggerate their claims by filing for more return coverage than it actually is. By far, it is the most faced challenge by claim providers because verifying wrong claims can cost millions of rupees in a single go.

How To Prevent Insurance Fraud In 2022?

According to the digital insurance summit, suspicious insurance consumers are inclined to conceal their identities. They are also likely to establish many accounts in order to stack the deck to their advantage. This is known as multi-accounting, and identifying commonalities between accounts is an excellent approach to prevent this type of fraud.

Data enrichment is a prominent and efficient way of ensuring that consumers and business owners are in a safe circle of protecting themselves from fraud. It is a process of collecting and analyzing data in a manner that is able to show any repetitive nature in any relevant context. Collecting ID proof for every customer is not easy for insurance companies, and moreover, it is time-consuming for customers and also a risky manual task. Investing in data enrichment can play a huge role in your privacy protection and ensuring that no fraudulent activities are unknown.

As pointed out at global finance events, before technologies, our tools and techniques to prevent insurance scams were not full proof and were very limited. Thanks to advanced technologies like artificial intelligence and machine learning that can provide transparency and flexibility to consumers and businesses. Insurance firms may use AI-based algorithms to detect fraudulent trends and actions. In such circumstances, the triggers might include recurrent claim filings, prior claim rejections, and other factors. Insurance companies can prevent fraud by pooling high-risk profiles based on similar characteristics. As per the latest discussion in the digital finance summit, Rather than relying on vulnerable security methods such as passwords and OTPs, policyholders may use biometric-based authentication to protect themselves from identity theft.

Summing up, the impact of insurance fraud is not only restricted to consumers and businesses; it is a severe threat to the economy. Insurance frauds cost billions of dollars every year, making it essential to take necessary steps to combat these scams. To avoid such catastrophe, you can hire experienced professionals, invest in the latest technologies, or attend events such as the Money 2.0 Conference, where hundreds of delegates from financial sectors come under one roof to educate people about various money-related topics.