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Insurance providers must be ready to tackle quote manipulation as potential fraud rises

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Sam Marsh, director, product management at LexisNexis Risk Solutions Insurance

As road fuel costs reach a record high[i]  and inflation hits a level not seen in 40 years[ii], it is little wonder that reducing motoring spend, including shopping around for cheaper car insurance, is top of the agenda for many people. Indeed, recent reports indicate that 68% of UK adults plan to decrease the amount they spend on driving[iii]. As finances are squeezed, the fact that one in five motor insurance buyers think it is fine to manipulate details in their insurance application to obtain a favourable quote on their premium[iv], indicates that insurance application fraud looks set to rise.

To some, quote manipulation may seem innocent enough, but deliberately misstating key pieces of information is fraud. This can have the knock-on effect of increasing policy prices for all.  More concerning is that individuals deliberately misstating information in their application could find their policy is made null and void if this is discovered at claim and they may also find it difficult to obtain insurance in the future.  What may seem like a little white lie can have long-lasting ramifications.

What exactly is quote manipulation though? Manipulating a quote is when a person applying for insurance (the proposer) deliberately materially changes information on an application throughout the quote journey, to reduce the premium. It could be the address the vehicle is left at overnight, whether it has any modifications or years licence held. Often this is done across numerous quotes to compare results, cherry-picking the best.

‘Fronting’ is an example of application fraud and often involves quote manipulation.  This is where a person (often a father/mother/older sibling) declare themselves as the main driver/proposer, when really it is their newly qualified family member who would be a higher cost to insure.  They will try numerous quotes, swapping out different main drivers, to see how the costs compare.

So how can the shrewd use of data enrichment at point of quote help the industry move the fight against fraud from detection at point of claim, to prevention at the front door?  It comes down to using quotation data intelligence gathered from across the insurance market.

Fraud comes in many guises, but insurance providers cannot fight it in silo. A market-wide quote history database can help identify potentially fraudulent quote behaviour in real-time by comparing quotes across a specific period of time to identify the probability of data being manipulated.  This insight puts insurance providers in a position to check the facts with the customer before policy inception.

It’s not just fraud prevention this quote history data can help with, understanding the likelihood of quote manipulation can also help support pricing and underwriting practices, when used alongside additional data attributes at the point of quote.

Indeed, insurance providers could combine unique insight into how, when and if an individual has shopped for insurance with further insurance specific data sources such as policy history (cancellations, gaps in cover); vehicle history (MOT, valuation, mileage); the presence and performance of Advanced Driver Assistance Systems; and soon claims history to create a 360-degree view of the risk. This can help insurance providers consider the suitability of a product or price for a particular customer, offering them a significantly better customer experience.

Our research suggests that it is younger people who are more likely to manipulate quotes with nearly three quarters of 18–24-year-olds in our recent study thinking any or some adjustment of information is okay in order to reduce their insurance premium[v].  This may not come as a surprise given a recent report has found that the under-30s are disproportionately being forced to bear the brunt of the costs of social care reform and Covid via a 10% increase National Insurance Contributions and freeze on the student loan repayment threshold[vi]. So, the ‘Packhorse Generation’ as they are being dubbed, may, more than other generations, give in to the temptation of quote manipulation.

However, as stated previously, if an insurance provider knows up front the risk of a quote being manipulated, that is their opportunity to query the validity of the data and educate consumers who may be genuinely unaware of the risks of deliberate mis-statements, before policy inception.  This approach can help protect both themselves and the customer from the outcome of fraud.

As economic pressure spirals, insurance professionals have an immediate opportunity to leverage consumer quote information to educate, protect and price customers based on their shopping behaviour.

[i] https://www.rac.co.uk/drive/news/fuel-prices/diesel-fuel-prices-hit-new-record-high-as-uk-moves-away-from-importing-russ/

[ii] https://www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/april2022

[iii] https://www.themotorombudsman.org/press-releases/tmo-urges-motorists-to-keep-vehicle-servicing-front-of-mind-in-the-face-of-cost-of-living-hike

[iv] LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on a survey of 1,546 consumers who had bought motor insurance online within the last 12 months and was conducted during April 2022

[v] LexisNexis Risk Solutions was not identified as the sponsor of this research, which was based on a survey of 1,546 consumers who had bought motor insurance online within the last 12 months and was conducted during April 2022

[vi] https://www.if.org.uk/wp-content/uploads/2022/02/packhorse_inflation_press_release_FINAL.pdf

Banking

Resilient technology is the most important factor for successful online banking services

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By James McCarthy, Director of Solutions Engineering, NS1

 

More than 90 percent of people in the UK use online banking, according to Statista and of these, over a quarter have opened an account with a digital-only bank. It makes sense. Digital services, along with security, are critical features that consumers now expect from their banks as a way to support their busy on-the-go lifestyles.

The frequency of cash transactions is dropping as contactless and card payments rise and the key to this is convenience. It is faster and easier for customers to use digitally-enabled services than traditional over-the-counter facilities, cheques, and cash. The Covid pandemic, which encouraged people to abandon cash, only accelerated a trend that was already picking up speed in the UK.

But as bank branches close—4865 by April of 2022 and a further 226 scheduled to close by the end of the year, Which research found—banks are under pressure to ensure their online and mobile services are always available. Not only does this keep customers satisfied and loyal, but it is also vital for compliance and regulatory purposes.

James McCarthy

Unfortunately, their ability to keep services online is often compromised. In June and July of this year alone, major banks including Barclays, Halifax, Lloyds, TSB, Nationwide, Santander, Nationwide, and Monzo, at various times, locked customers out of their accounts due to outages, leaving them unable to access their mobile banking apps, transfer funds, or view their balances. According to The Mirror, Downdetector,  a website which tracks outages, showed over 1500 service failures were reported in one day as a result of problems at NatWest.

These incidents do not go unnoticed. Customers are quick to amplify their criticism on social media, drawing negative attention for the bank involved, and eroding not just consumer trust, but the trust of other stakeholders in the business. Trading banks leave themselves open to significant losses in transactions if their systems go down due to an outage, even for a few seconds.

There are a multitude of reasons for banking services to fail. The majority of internet-based banking outages occur because the bank’s own internal systems fail. This can be as a result of transferring customer data from legacy platforms which might involve switching off parts of the network. It can also be because they rely on cloud providers to deliver their services and the provider experiences an outage. The Bank of England has said that a quarter of major banks and a third of payment activity is hosted on the public cloud.

There are, however, steps that banks and other financial institutions can take to prevent outages and ensure as close to 100% uptime as possible for banking services.

Building resiliency strategies

If we assume that outages are inevitable, which all banks should, the best solution to managing risk is to embrace infrastructure resiliency strategies. One method is to adopt a multi-cloud and multi-CDN (content delivery platform) approach, which means utilising services from a variety of providers. This will ensure that if one fails, another one can be deployed, eliminating the single point-of-failure that renders systems and services out of action. If the financial institution uses a secondary provider—such as when international banking services are being provided across multiple locations—the agreement must include an assurance that the bank’s applications will operate if the primary provider goes down.

This process of building resiliency in layers, is further strengthened if banks have observability of application delivery performance, and it is beneficial for them to invest in tools that allow them to quickly transfer from one cloud service provider or CDN if it fails to perform against expectations.

Automating against human error

Banks that are further down the digital transformation route should consider the impact of human error on outage incidents and opt for network automation. This will enable systems to communicate seamlessly, giving banks operational agility and stability across the entire IT environment. They can start with a single network source of truth, which allows automation tools to gather all the data they need to optimise resource usage and puts banks in full control of their networks. In addition it will signal to regulators that the bank is taking its provisioning of infrastructure very seriously.

Dynamic steering 

Despite evidence to the contrary, downtime in banking should never be acceptable, and IT teams can make use of specialist tools that allow them to dynamically steer their online traffic more easily. It is not unusual for a DNS failure (domain name system) to be the root cause of an outage, given its importance in the tech stack, so putting in place a secondary DNS network, or multiple DNS systems with separate infrastructures will allow for rerouting of traffic. Teams will then have the power to establish steering policies and change capacity thresholds, so that an influx of activity, or a resource failure, will not affect the smooth-running of their online services. If they utilise monitoring and observability features, they will have the data they need to make decisions based on the real time experiences of end users and identify repeated issues that can be rectified.

Banks are some way into their transformation journeys, and building reputations based on the digital services that they offer. It is essential that they deploy resilient technology that allows them to scale and deliver, regardless of whether the cloud providers they use experience outages, or an internal human error is made, or the online demands of customers suddenly and simultaneously peak. Modern technology will not only speed up the services they provide, but it will also arm them with the resilience they need to compare favourably in the competition stakes.

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Finance

Why Financial Services must ‘Change its Change’ to deliver results

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By Hervé Mazenod, Managing Director, Financial Services Sector at Webhelp 

You can almost hear the collective sigh of relief from financial service providers following their business operations being pushed to the limits during the pandemic. But as the industry creates its new roadmap for the future, we must take care not to lose sight of the massive gains we realised, albeit inadvertently, as a result of COVID. While pain and challenge grabbed the headlines, this was also a time of unparalleled development – where financial service brands rapidly adopted a renewed sense of purpose and delivered urgent, game-changing business transformations.  

Since then, we’ve seen a slowdown in momentum – despite there being more pressure to optimise operational resilience, cost and service. In parallel, members of the public still rank financial services 15th out of 16 industries in terms of public trust, according to the 2022 Edelman Trust Barometer. That’s despite a slight increase of 3% from last year. 

It’s no secret that the financial services industry is grappling with a ‘perfect storm’ of political, environmental, social, technological, legal, and economic (PESTLE) challenges. All that, alongside managing pressure from shareholders to reduce the costs of service, improve revenue and delivery, and protect people and organizations from risks. 

But there is another, harder reality – it’s time for some brands to face a few home truths regarding their response. The global financial services sector makes up around 20-25% of the global economy – we have the people, brains, passion, and power to proactively steer and redesign the global industry around challenges. So, by definition, we must accept some level of responsibility for the business pains we are now facing.  

Creating great customer experiences, digitisation, responding to stricter regulation – these themes are nothing new. Over decades, scores of banks and insurers have responded to PESTLE challenges by implementing ambitious change programmes. And while there’s absolutely nothing wrong with aiming high, the problem comes when brands are unwilling to consider better ways of working than delivering big batch, inflexible, four-year plans. It can take months just to scope out the work, design a change, or run some trials. By the time brands implement these plans, everything has changed – they’ve got a new political situation, interest rates have gone up and they’re already behind the curve.  

That way of working isn’t right for customers either. A key way for financial service firms to build trust with customers is to solve their problems when things go wrong. But research shows that 25% of customers couldn’t get their problem solved completely on the first contact – be it poor customer journeys, poorly-designed apps/tech, or failing automation.  

These glitches could be viewed as being at odds with requirements of the FCA’s new Consumer Duty. It requires financial service companies to “deliver good outcomes for retail customers” and to compete “vigorously in the interests of customers, in line with its mission to better protect customers.

The financial services industry is working hard to deliver customer experiences – bringing in new products and services, available easily through apps, and supported with ever-increasing due diligence requirements. And so change itself is not a problem – it’s the methodology that is. We cannot solve this by either tinkering around the edges or preparing wholly unwieldy plans. We must ‘change the change’, stop ‘analysis paralysis’, and take a more agile view in order to be more responsive – especially amid the looming recession – when financial services are grappling for talent in an employees’ market. 

Retail and fintech: beacons for future innovation?  

It’s widely acknowledged that fintech is leading the way in enabling rapid change and delivering milestones at pace. In parallel, we take lessons learned from the ‘best in class’ innovation emerging from retail, which has optimised customer journeys to a different level. 

Take The Very Group for example – the company created a Customer Closeness Center (CCC) – an environment they can use to identify and test improvements to CX, customer journeys, and user experiences in a real customer environment, in real time. This involved gathering insights which inform key business changes and rolling out digital technologies such as chatbots. The Very Group also improved voice and email services on the front line, upgraded complaints management, and are delivering significant transformation of back office. 

This transformation led to a 33% year-on-year reduction in average contacts, reduced cost by over £5 million in contact reductions alone, and achieved a 73% First Contact Resolution rate. It also achieved a 35% score on Net Promoter, based on customers who made contact using the telephone, which is more than 20% better than the industry average. It was effort, not luck, that saw them win several CX and innovation awards – particularly the way in which the group implemented change; linked up technology, data, process, and people; and tested and continuously improved the solution daily and weekly.  

Changing the change brings happier customers, better employee engagement, and improved resilience and overall profitability. And there’s nothing stopping the rest of the financial services industry from becoming the next globally-leading industry for transforming operations and delivering integrated customer experience.  

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