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  • July 2019
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Combating Life Insurance Fraud in a Digital World

Q&A with LIMRA’s Paul Henry and LOMA’s Gene Stone

  • Paul Henry
  • Gene Stone
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Digital fraud: illustration of data loss
In Brief
As personally identifiable information proliferates and life carriers digitize, fraud is an ever-present and growing risk. In a candid interview, representatives from LIMRA and LOMA preview their upcoming presentation for the RGA Fraud Conference.      


How would you characterize the current environment for life insurance fraud?

Things have changed dramatically in the past few years. Whereas fraudsters had been focusing on banking, credit cards, and related financial services, they are increasingly training their sights on insurance. The advent of chip technology and other measures have successfully reduced credit card fraud. Meanwhile, greater access to personally identifiable information (PII) has opened doors in other areas, including insurance.

Fraudsters are using PII to access accounts and monitor activity, and in the process are getting to know our business. It’s become a cat-and-mouse game of fraudsters identifying gaps and insurers building better defenses to close those gaps, which is more challenging than ever. Carriers used to only have to worry about fraud at application/underwriting and claims, but with account takeover fraud, they need to be vigilant about protecting themselves throughout the lifetime of the policy.

Given this challenging new environment, what approaches to fraud prevention do you recommend insurers adopt?

No magic bullet exists to cover every opening fraudsters seek to exploit. For that reason, fraud prevention experts recommend layers of coordinated defenses. When a red flag is detected, that incident should be advanced to a higher level of scrutiny, and all security layers should work together to detect patterns, identify gaps, and facilitate action. Data analytics and technology clearly play an important role, as predictive models and machine learning offer opportunities to connect the dots and deliver actionable insights from varied and seemingly countless new information inputs.

This is not to diminish the human component, which is often the first line of defense. Employees must be trained in fraud prevention and continuously made award of the latest schemes. Companies need to establish common processes for identifying and handling suspicious activity for all employees – from call center staff through to claims adjudicators. Vigilance is essential: Fraudsters are constantly adapting and improving their techniques, so we have to adapt and improve our strategies at least as fast.

Why is it important for insurers to invest in fraud prevention?

Obviously, there is the financial aspect. According to the Coalition Against Insurance Fraud, fraud costs insurance companies and consumers more than $80 billion annually in the U.S. alone. Beyond the impact on the bottom line is the impact on companies’ reputation and brand, which in many ways is more concerning. Our industry is built on trust, and to have that trust brought into question could present long-lasting negative repercussions.

What do you see as the greatest threat for insurance fraud moving forward?

As we mentioned earlier, PII is everywhere. Everyone’s personal data is available for sale on the dark web to some extent – even if it wasn’t part of a major breach. And once it’s out there, there is no way to get it back. Fraudsters can use this data to infiltrate accounts, often using call centers and websites as their entry points. Account takeover attacks have more than doubled over the past two years. A staggering 98% of respondents in a recent LIMRA survey of insurance companies cited account takeover fraud as a significant concern for their individual annuities and defined contribution benefit plans. For these reasons, we will be presenting on account takeover fraud and where it is headed at the upcoming RGA Fraud Conference.    

What are LOMA and LIMRA doing to help the industry meet the challenges of insurance fraud?

Through a major initiative launched last year, we have combined our organizations’ expertise, experience, and resources to combat fraud more aggressively than ever before. Areas of focus include enhanced training programs; new fraud-specific research projects; and information sharing, fraud reporting, and industry benchmarking through our FraudSource service. But what we’re most excited about this year is the launch of FraudShare, a data clearinghouse that serves as a secure, convenient, centralized, and timely early-warning system.

FraudShare works by creating a network of member companies to monitor and better understand new fraud trends and challenges. Fraudulent attacks at one company are quickly assessed and reported to others in the FraudShare network. Since fraudsters often move from company to company, documenting details from attacks in a shared database significantly increases detection capabilities. Furthermore, increased and immediate awareness of new schemes allows member companies to proactively build defenses. The FraudShare tool is currently in its pilot phase and we intend to release the operational version later this year.

What is the central message regarding fraud prevention you would like all insurers to hear?

While fraud is a very real and very serious challenge to our industry, we can succeed in meeting that challenge if we remain vigilant and work together. It’s really the only way.

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Meet the Authors & Experts

Paul Henry
Vice President and Managing Director, Retirement Clients and Products, LIMRA
Gene Stone
Assistant Vice President, Education and Training, LOMA