October 19, 2017 by Canadian Underwriter
Today’s criminals are more sophisticated than ever, as cross-industry fraud is occurring in 84% of polled cases, a new survey of fraud mitigation professionals has found.
The third annual LexisNexis Fraud Mitigation Study surveyed 800 fraud mitigation professionals from the insurance, financial services, retail, government, healthcare and communications industries in the United States. The survey, from Lexis Nexis Risk Solutions, has a margin of error of +/- three points (at the 95% confidence level).
In total, 85% of polled respondents saw some fraud cases they investigate connected to another industry, with retail (24%) and healthcare (18%) most often saying that their cases are never cross-industry. Insurance respondents (50%) were the most likely to report that cross-industry fraud cases had a larger impact than those from within exclusively their own industry, followed by retail (42%).
The survey, released last week, also found that insurance respondents (53%), followed by financial services (43%), were the top two groups to say that outside industry data is considered highly valuable to help with fraud investigations. As well, insurance (53%), communications (47%) and financial services (45%) were the three industries most likely to highly consider contributing their outcomes to help fight fraud.
Overall, 84% of professionals said that some fraud cases they investigated were connected to other industries. Seventy-eight per cent of fraud cases had a “moderate to high financial impact and nearly half (48%) caused “extreme financial impact,” Lexis Nexis Risk Solutions said in a press release. “An insurance fraud scheme to stage an auto accident, for example, could also see the perpetrator exploit system gaps to fraudulently claim government benefits or participate in telecommunications, retail or payment card fraud,” the release said.
The estimated annual combined cost is in the billions of dollars of losses, with fraud mitigation professionals saying their biggest concerns stem from identity theft (41%), hacking (36%), employee fraud (33%) and claims fraud (31%).
Other insurance-related findings include:
“Fraud has become more pervasive and costly over time, and today’s criminals are more sophisticated than ever, with an increasing number of fraud schemes affecting multiple organizations across multiple industries,” said Bill Madison, CEO of insurance at LexisNexis Risk Solutions. “The good news is that organizations are realizing the value of working together to fight fraud by sharing information within and across business and government sectors so that they can better address the consumers who need their services.”
Interest is also growing among fraud mitigators to utilize fraud data from other organizations, both within their own industries and from other industries, the release said. Eighty-four per cent of professionals said that more access to industry fraud would be valuable and 80% see access to outside-industry data as very valuable.
This has led to increased interest in sharing data in a common cause to fight fraud, Lexis Nexis Risk Solutions suggested. Eighty-six per cent of professionals said they would consider contributing their investigative outcomes to a contributory database if they could receive the outcomes data back from other industries. Insurance companies, in particular, place a high value on data coming from organizations outside their industry (along with financial organizations) because they experience widespread cross-industry fraud and believe it has a high financial impact on their organization, the study revealed. Retailers are also keen on cross-industry cooperation because of the increasing threats of identify fraud in the industry.
As organizations incorporate more external data and analytics, fraud mitigation professionals are using the technology primarily for behavioural analytics and predictive modelling, representing a slight shift from previous years where they also favoured automated business rules to fight fraud, the release said. More than three-quarters of professionals said they use both external data (79%) and analytics (77%) to fight fraud now. “This change may reflect the increasing sophistication in fraud mitigation methodologies,” Madison suggested.
Other findings in the 2017 LexisNexis Fraud Mitigation Study study: