Top 10

Ghost brokers – what are they, and how can insurers stop them?

Published

11 months ago

November 14, 2022

admin

Gareth Evans – Head of Customer Success UK, Ireland & The Nordics, Shift Technology

Today’s insurance-buying process is virtually unrecognisable from just a few decades ago. Gone are the days when our first port of call would be to consult a traditional agent or broker. Today, instead of consulting someone we know personally (and might have used time and time again over decades), most of us will turn to online insurance brokerages and price comparison sites.

In theory, this has made buying insurance much easier. After all, we can now communicate directly with insurers, or get hold of the best possible deal in minutes using an online brokerage. But who’s running all these online brokerages, and can they all be trusted?

In a word, no. The online insurance brokerage space is increasingly being co-opted by bad actors known as ghost brokers. And yes, they’re as frightening as they sound! Ghost brokers sell bogus insurance policies, preying on unsuspecting consumers hunting for the best deal – a group that’s likely to grow as cost-of-living pressures continue to mount. Since they’re usually less familiar with the ins-and-outs of the insurance-buying process, ghost brokers tend to target young people. Over a third of victims are aged 17-29, and they’re often drawn in through adverts on social media.

How does ghost broking work?

Unlicensed ghost brokers claim to work with insurance agencies to get much lower costs than normal. This is, of course, a lie.

The most blatant form of deception perpetuated by ghost brokers is selling insurance policies that simply don’t exist. The falsified supporting documentation either comes from completely invented insurance companies, or purports to be from genuine insurers to create a veneer of respectability. For insurance companies, this can pose a serious issue, denting consumer trust and poisoning relationships with younger customers.

Other ways that ghost brokers defraud consumers is by signing up multiple customers for the same policy or entering false information about prospective policy holders to get artificially lower rates. This presents a serious financial risk to insurance companies, who are forced to dedicate significant resources to investigating and unwinding fraudulent policies in the aftermath of a claim.

Regardless of the type of scam, the outcome is the same. Victims pay insurance premiums to the ghost broker every month until an incident occurs – at which point they attempt to make a claim, only to discover they’re uninsured. This leaves them out of pocket, and in some jurisdictions liable to being fined or even convicted in a criminal court.

How does insurers’ current infrastructure enable ghost broking?

In large insurance companies, customer information often exists in siloes. Ghost brokers know this and are savvy about taking advantage of it.

Consider ghost brokers who use false information to create low-cost policies. Typically, they might misrepresent a newly qualified 19-year-old driver as a seasoned 42-year-old. Confirming the driver’s actual age can be surprisingly time consuming if the insurer isn’t automatically checking this against external data sources, like government databases.

Another way ghost brokers take advantage of insurers’ legacy systems is by creating a single combined policy for all their victims. For this scam to work, the ghost broker must use the same phone number and address for everyone named on the policy – which can of course arouse suspicion. To slip through the cracks, ghost brokers will create multiple customer accounts through different portals – online, over the phone, in branch etc. If these separate portals don’t link to the same database, chances are it’ll be a while before different teams within the insurance company compare notes and discover the deception.

What can insurers do to stamp out ghost broking once and for all?

Currently, the onus is very much on policyholders to be vigilant about ghost broking. Though consumers should certainly check if the broker they’re using is licensed before buying a policy, insurers should also play their part to limit the damage caused by ghost brokers. Raising awareness on the topic is crucial – this is something the Insurance Fraud Bureau has been doing through multiple educational based campaigns.

Insurers can also limit the damage caused by ghost brokers by implementing a layer of AI into their back-end systems, removing information siloes and making it easier to detect ghost brokers. So, if a ghost broker attempts to sign up multiple customers using the same information, they’ll be detected straight away. Even if the broker signed them up using different channels or fake information. AI is capable of spotting reused and changing MOs to identify ghost broking patterns and refer this suspicious policy behaviour for further investigation.

In addition, AI can recognise unusual patterns in customer data. For example, by flagging that a single IP address has been creating accounts for multiple customers and then cancelling them after a short time. This pattern might indicate a ghost broker at work, and certainly merits further investigation.

The bottom line? Ghost brokers aren’t going to disappear on their own anytime soon. The sooner insurers can identify them and stop them in their tracks, the better. A range of AI-based solutions that can help with this already exist. It’s up to insurers to implement them or risk incurring further reputational and financial damages.

Up Next

Web Scraping Evolves Financial Services Businesses

Don't Miss

Let’s get fiscal – How to understand R&D Tax Claim Eligibility

Banking

Emerging technology will power long-term sustainability within the UK banking industry

Published

3 days ago

September 26, 2023

admin

By Peter-Jan Van De Venn, VP Global Digital Banking at Hexaware Mobiquity.

Sustainability has been a big focus for the banking industry in recent years, with the issue becoming increasingly important for consumers. It’s no wonder that sustainability has become baked into the purposes of almost every bank, from Natwest to HSBC.

However, the economic uncertainty of the last year has led to many banks putting it on the back burner. Challenging market conditions have forced financial institutions to change their priorities to concentrate on protecting the bottom line. Our research found there’s been a significant drop in the number of UK banks saying that sustainability remains a key business strategy. 12 months ago it was a major priority for 100 per cent of banks, but now that number has shrunk to 60 percent.

Whilst it’s understandable that banks are feeling the pressure at the moment, there’s a risk that they will miss out if they hit the pause button. From cost savings brought by innovative digital products and services, to improved brand reputation and increased profitability, there are a lot of longer-term benefits they could be failing to unlock. So how can they keep moving forward?

Losing momentum

Emerging technology holds the key to their success, with the power to disrupt current behaviours and promote a more sustainable culture. Banks are already aware of this, with 76 percent using digital transformation to drive sustainability, but a lack of leadership has made it difficult to build momentum in the last 12 months. Currently just over half (54 percent) of banks have tasked an executive at board level with overseeing sustainability – way down from 83% just 12 months ago.

This lack of board authority means banks are struggling to engage the entire organisation to move ahead with sustainable initiatives. As a result, almost two-thirds of banks are seeing progress slow, admitting they are not actively taking steps to foster more sustainable behaviours throughout the organisation. Those that have taken their foot off the gas need to find a way to move forward again.

No time for standing still

Banks know that technology can drive sustainable behaviour. For instance, many of them are already encouraging their workforce to work remotely, as a way of reducing travel. This has two benefits – not only does it cut the costs of running physical offices at full capacity, but also reduces the bank’s carbon footprint. There has never been a better time to invest in technology to drive more sustainable behaviours.

New digital products and services can also extend the benefits beyond employees to encompass the wider customer base. A fair number of banks are already investing to make this happen. More than a third (35 percent) of banking organisations are using Machine Learning (ML), Artificial Intelligence (AI), cloud and analytics to make digital services more easily accessible. Investment in these technologies will be critical as the number of physical bank branches continues to decrease, with figures from Which? showing this is taking place at a rate of 54 branch closures each month.

Hitting environmental and social responsibility goals

Emerging technologies can also help banks keep pace with tightening ESG rules and regulations. Banks are faced with demands for increasingly granular reporting and transparency on ESG – demanding a new approach. In line, 41% of them are developing data visualisation tools to improve stakeholder engagement and understanding of ESG risks and opportunities, while 37% are using machine learning and artificial intelligence to identify and track ESG risks and opportunities across a wide range of data sources.

More than one in three are also using the blockchain to improve transparency and traceability in supply chains, and implementing digital tools and platforms to collect, analyse, and report ESG data and metrics in a standardised and consistent manner. All these applications of emerging technology will put banks on track to address global environmental challenges and unlock a greener future.

Long-term sustainability

As the economic pressures hopefully start to subside, increasing numbers of banks will start investigating how they can use emerging technologies to provide engaging experiences and value-added services for customers, to drive greater revenue and efficiencies.

Whilst banks are right to focus on their revenue under difficult trading conditions, it’s important they don’t miss out on the long-term benefits that sustainability can bring. To capitalise on this, banks must keep pushing the boundaries and invest in emerging innovations to drive more sustainable banking behaviours, benefiting the planet and driving great digital experiences for customers.

Banking

The Future of Banking: Streamlined Cash Management for ATMs

Published

3 days ago

September 26, 2023

admin

Gaetano Ziri, Innovation Manager, Auriga

“Maintaining free access to cash for the community demands robust strategies to mitigate the escalating costs incurred by banks and ATM operators in handling cash. A pivotal step in this direction is modernising cash management systems to foster efficiency and reduce operational costs.

Back in 2018, a report by McKinsey underscored the urgent need to overhaul the largely manual and disjointed systems relied upon by nearly half the banks worldwide for forecasting cash requirements at branches and ATMs. Despite the decrease in cash usage noted by the European Central Bank, the cost of managing cash has not abated, primarily due to surging labour costs.

To reconcile the demand for free access to cash with the requisite cost reductions, banks are increasingly turning towards tech-driven solutions in cash management that elevate service levels while driving down expenses.

The Complex Landscape of ATM Network Management

Operating a vast ATM network can be a double-edged sword for banks, simultaneously offering customer convenience and engendering considerable challenges, including substantial cash handling, management, transit and security costs. Each ATM embodies a multifaceted operation involving numerous cash transfer operatives, necessitating a coordinated strategy to forestall costly inefficiencies.

The remedy is a holistic, data-centric approach to streamline the management of intricate ATM networks and counter the escalating costs associated with cash access. The merits of such an approach, grounded in continuous data collection and analysis across ATM networks, encompass:

Strategic Planning: Leveraging real-time data to craft bespoke strategies for individual branches or regions, assuring optimal cash flow management and averting superfluous cash loading orders.
Operational Transparency: Facilitating stakeholders with instantaneous access to accounting and operational data relating to cash supply chains, thereby enabling timely interventions and adaptations.
Enhanced Customer Experience: Minimising ATM downtimes to guarantee uninterrupted cash access to customers, enhancing their banking experience.

Innovations in Cash Management: A Closer Look

So, how does this revolutionary cash management technology function? The answer lies in a series of sophisticated features that employ cutting-edge predictive analytics, automation, and data-driven decision-making:

Predictive Analysis: Forward-thinking solutions predict cash necessities of distinct units, offering precise demand and cash flow projections by considering variables such as seasonal fluctuations, holidays, and daily usage trends.
Automation and Monitoring: Swapping manual processes or basic mathematical functions with modern software solutions for cash management ushers in real-time monitoring and efficient intervention planning, which can potentially diminish order management costs by a significant margin, whilst improving precision and operational fluidity.
Optimised Cash Transit Management: Utilising predictive analytics to strategically plan cash restocks, thereby reducing the likelihood of ATMs depleting their cash reserves and improving customer satisfaction.
Data-Driven Decision Making: Availing a comprehensive dashboard to generate timely reports and monitor critical metrics facilitates strategic decision-making grounded in accurate data, substantially reducing residual cash stock in ATMs.

As the financial landscape evolves, banks and financial institutions are impelled to adapt and innovate. Traditional cash management approaches are increasingly becoming outdated, paving the way for modern, data-driven solutions. These not only embody a commitment to technological advancement but also signify a strategic movement towards future readiness.

Embracing such technologies promises streamlined operations, substantial cost reductions, and a superior customer experience, setting a new standard in ATM network management.”