Direct insurance - whether by
phone or over the internet - is fundamentally different from traditional neighborhood
agency business on many dimensions. The most obvious and important one is that there isn’t a trained agent
looking the customer in the eye, asking the right questions, and placing the applicant
with a company whose risk appetite is a good match. The
truth is a local agent adds a lot of ‘hidden’ value because it is harder to
cheat someone who knows you, and a good agent can often screen out trouble
before it starts by inspecting the assets and assessing the persons involved
before a risk is accepted. Capturing
that value from an agent is very expensive - and that cost explains the rush to
online insurance - but it prevents many types of fraud.
Today’s growing book of direct
insurance has a very different character and carries much higher risk. These transactions are a fast,
inexpensive and easy way for consumers and carriers to interact. Indeed, many carriers promote their online
sales process as faster than the next guy while saving consumers ‘hundreds of
dollars a year in premiums’. But this
business model relies on (often flawed) purchased or volunteered information,
requires instant integration of complex data to make risk decisions, and, worst
of all, it is anonymous.
Fraudsters rely on that anonymity
to defraud carriers of 5-10% of NPW – or more – in new business. Whether it is small-ticket cheaters who
lie on quotes to get cheaper rates, serial grifters who play the online game
just to get insurance cards for themselves or others, or organized criminal
rings setting up staged accidents and body shop frauds – all rely on the
anonymity of the online transaction to hide in plain sight.
The simple truth is that fraudsters
don’t think you’re watching or able to stop them. And the fact is they are
probably right. Do you actively monitor your quotes for signs
of manipulation? How do you know the
condition of the assets you insure? Can
you tell when they’re playing you with bogus or inconsistent information across
time, other quotes or prior policies? Has
the applicant or his associates defrauded you before? And can you do anything about any of it in
the 7½ minutes during which you promised to close a policy?
For most carriers, the answers
are no, no, no, no and no.
And so the fraudsters win. Because they are smart. They find the weaknesses in your systems to get
rate, coverage and claims benefits they don’t deserve. And they will do it again and again because
you’re an easy mark when you don’t watch and cannot act. Until you find them after the 3rd
or 4th time they’ve ripped you off – in which case they often just
‘disappear’ - or you stop writing business in that neighborhood because it’s
not worth the trouble. So you eat the
losses, say you’ve ‘learned’ a lot from the experience, and pull back.
But you can stop whole
classes of fraud if you show them that you can see what they’re doing. If you signal that you are paying
attention. f you take appropriate
action during live transactions.
Behavioral science experts say people generally won’t cheat if they know
that they’re being watched. VeracityID’s
experience is that fraudsters conclude you know what they’re doing if you
employ the right set of tools at point of sale, during endorsements and before
claims are paid. So they go elsewhere to
ply their trade, and with them whole classes of fraud simply disappear.
VeracityID has the tools to make
this happen for auto carriers. Let us
show you how you can quickly transform your underperforming online or direct
business with a short demonstration or a pilot. Let’s stop fraud in your business, together.
