How the insurance industry can use Bank Account Verification (AVS) and Identity Verification Services (IVS) to minimise fraud risk.
The insurance industry is built on a foundation of trust between businesses and their clients. Insurers depend on their clients to provide accurate information, from their application for cover to their claims, while consumers rely on these companies to provide quick pay-outs with minimal fuss. This makes these businesses vulnerable to fraud and, since the rise of the pandemic, the fraud risk has increased, especially with regards to funeral cover. Thankfully, real-time, digital services such as Bank Account Verification (AVS)
and Identity Verification Services (IVS)
offer a solution to this vulnerability.
Funeral claim fraud: What is it and how does it happen?
Insurance fraud is the unlawful act of withholding personal information or providing incorrect information in order to claim policy funds. The usual targets of these fraud schemes are insurance companies or agents. Funeral claim fraud involves the fabrication of an identity based on the use of fraudulent information including a victim’s personal information, false death certificates, and other incorrect or fake information. The death certificate is then used to lodge a claim either using the victim’s policy or by opening a policy only to lay a claim months later. The pandemic has seen a rise in these false claims since the pandemic, stemming from the poor economic conditions that it has brought about. Individuals struggling with financial difficulties are tempted by what these claims can offer in terms of pay-outs, and so turn to fraudulency for their own security. On the darker side of insurance fraud, syndicates execute complex fraud strategies, even going as far as committing murder in order to obtain policy funds. Regardless of the reason or the culprit, weaknesses in the industries Know Your Customer (KYC)
processes have resulted in a huge increase in fraudulent claims since 2020.
The industry statistics
Insurance companies across South Africa reported an increase of 12% in fraudulent claims. In total, these claims were valued at approximately R50 million in 2020. This drastic increase has been noted as a consequence of the covid-19 pandemic. The highest of these increases has been found in the funeral insurance sector with over 2000 claims. Since 2019, these claims have grown exponentially from a value of R54 million to R80 million in 2020
. Though funeral insurance has frequently been targeted by fraudsters in the past, the effects of the pandemic have definitely had a significant impact on the fraud risk
to this sector and will continue to be a threat to insurers unless stringent processes are put in place to manage these risks effectively.
How businesses can protect themselves
Due to their line of work, it is imperative that insurance companies utilise effective fraud prevention strategies. It is in their best interest to identify fraud before any payouts happen, decrease claims, and where possible, claim back any money that had already been paid out. To do so, insurers need quick and effective solutions that allow them to maintain their relationships with good clients while mitigating the risk of fraudulent activity. For this reason, many of these businesses have in-house teams that deal with the identification and investigation of such fraudulent activities. However, this is a time consuming, resource heavy function that cannot stand alone as the only fraud prevention strategy adopted by insurers. The most effective way for a company in the insurance industry to protect itself and its clients is by placing themselves a step ahead of fraudsters with third-party digital solutions such as AVS and IVS. Not only do these tools provide the insurer with a means of detecting fraud in real-time, but better yet they offer a preventative solution, stopping fraudulent activity in its tracks.
The benefits of real-time, digital services
The insurance industry is fast-paced, and when it comes to funeral claims, companies attempt to make the process quick and hassle-free for the convenience and emotional welfare of the client’s family. AVS
offer a solution to this vulnerability. are two highly effective real-time digital services that provide insurers with fast and accurate results, allowing them to identify and authenticate client information in real-time. In a testimonial by 21st Century Life – a proud Bitventure client – they reported that bank account verification eliminated the issue of customers providing them with fake bank account information and, since the introduction of the products, have managed to minimise the number of fraud risks in their system. Insurers can use digital services to diminish their fraud risks too. In fact, a client’s personal details and banking information can be verified across all major banks, as well as a bureau of personal data via the Department of Home Affairs in under 60 seconds. These efficient systems allow the company to validate genuine client claims and weed out fraudulent claims in an instant, maintaining the integrity of their business as well as the business-client relationships.