Trends in Life Insurance Fraud: Looking Ahead in 2023
Fraud in the life insurance industry continues to be a major concern in 2023, globally and in the US domestic market. The increasing use of technology and the rise of complex financial products have created new opportunities for fraudulent activity. At the same time, advances in investigative efforts are helping to reduce the incidence of fraud.
Interaction with healthcare providers, policyholders, and other stakeholders to gather information and resolve any disputes or issues related to claims is vitally important. This further helps insurance companies to develop and implement anti-fraud programs and policies. In the US, the largest source of life insurance fraud continues to be fraudulent claims.
As we look forward to 2023 there are several trends that we should anticipate.
2023 Life Insurance Fraud Trends:
Life insurance fraud has become more sophisticated and organized, with many scams now being carried out by international criminal gangs.
Fraudsters are taking advantage of the growing popularity of online insurance products to target victims, often through phishing scams and false websites.
The rise of social media has also created new opportunities for fraudsters to target individuals and steal their personal information.
Life insurance fraud is becoming more prevalent in emerging markets, where regulatory frameworks are often weak, and oversight is limited.
As the life insurance industry continues to shift towards digital channels, fraudsters will find new ways to exploit vulnerabilities in digital systems and processes, such as application fraud or the use of false identities.
Fraudsters may continue to make false representations or conceal information on life insurance applications to obtain policies under false pretences. This will increase from the $3.1 billion in false and fraudulent claims in 2020.
Fraudsters may also make false or exaggerated claims for life insurance benefits or use the identities of deceased individuals to make fraudulent claims.
Investment scams related to life insurance products, such as annuities or indexed universal life policies, will continue to be a concern as fraudsters exploit the lack of financial literacy among policyholders.
Life insurance policies may also be used as a tool for money laundering, as they offer a way to legitimize illegal funds and move them through the financial system undetected.
Fraudsters are also exploiting the complexity of life insurance products, such as annuities and long-term care policies, to deceive policyholders.
The use of technology, such as artificial intelligence and machine learning, is increasing the efficiency and effectiveness of fraud detection. This includes the use of data mining and predictive analytics to detect fraudulent activity, as well as the implementation of anti-fraud measures such as biometric authentication and real-time monitoring of policyholder behaviour. This is highlighted by the fact that 21% of insurance companies plan to invest in AI in the next two years.
However, some life insurance companies are still relying on outdated fraud detection systems that are vulnerable to manipulation. Fraud in the life insurance industry remains a major challenge. To effectively combat fraud, it is essential for life insurance companies to work together with regulators, fraud investigators, and other stakeholders to share information and resources. By working together, the industry can better protect consumers and prevent fraudsters from taking advantage of the life insurance system.