The fight-back starts here:
Future-proofing insurers
against financial crime
Executive Summary
Dennis Toomey
Global Head Insurance Fraud Product Manager, BAE Systems
The criminal threats facing insurers are sophisticated, global and ever-growing. They are also difficult to identify and quantify with accuracy, making them hard to combat. But it is clear that the most successful companies of tomorrow will be those who put in the most work today to anticipate and negate future challenges.
The global cost of fraud across all sectors could be as much as £3.2 trillion per year, according to consultants Crowe. Meanwhile, Accenture suggests that companies worldwide could incur $5.2 trillion in costs and lost revenue from cyber attacks over the next five years.
Consistency and collaboration are essential. If insurers continue to tackle financial crime in a piecemeal fashion, without understanding the true scope and intricacy of the problem, they will be forever playing catch-up. So how can insurers, whose customer data makes them a prime target for criminals, future-proof themselves against these risks?
The solution, as well as the problem, often lies in the cultural, operational and data silos within which they operate, as this paper will explain.
The criminal threats facing insurers are sophisticated, global and ever-growing. They are also difficult to identify and quantify with accuracy, making them hard to combat. But it is clear that the most successful companies of tomorrow will be those who put in the most work today to anticipate and negate future challenges.
The global cost of fraud across all sectors could be as much as £3.2 trillion per year, according to consultants Crowe. Meanwhile, Accenture suggests that companies worldwide could incur $5.2 trillion in costs and lost revenue from cyber attacks over the next five years.
Consistency and collaboration are essential. If insurers continue to tackle financial crime in a piecemeal fashion, without understanding the true scope and intricacy of the problem, they will be forever playing catch-up. So how can insurers, whose customer data makes them a prime target for criminals, future-proof themselves against these risks?
The solution, as well as the problem, often lies in the cultural, operational and data silos within which they operate, as this paper will explain.
Dennis Toomey
Global Head Insurance Fraud,
Product Manager,
BAE Systems
Quantifying a global problem
Insurance fraud is not a new phenomenon. Indeed, an epigram by the Roman poet Martial provides clear evidence of its existence in the Roman Empire during the first
century AD:
“Tongilianus, you paid two hundred for your house;
An accident too common in this city destroyed it.
You collected ten times more. Doesn’t it seem, I pray,
That you set fire to your own house, Tongilianus?”
Fraud and financial crime are ancient problems then, human instinct even.
Quantifying a global problem
Insurance fraud is not a new phenomenon. Indeed, an epigram by the Roman poet Martial provides clear evidence of its existence in the Roman Empire during the first century AD:
“Tongilianus, you paid two hundred for your house;
An accident too common in this city destroyed it.
You collected ten times more. Doesn’t it seem, I pray,
That you set fire to your own house, Tongilianus?”
Fraud and financial crime are ancient problems then, human instinct even.
According to a 2017/18 Global Fraud & Risk Report by Kroll, 84 per cent of financial services firms experienced fraud and 86 per cent experienced a cyber attack in the preceding 12 months, the highest rate reported by any sector.
And when we narrow the scope down, we see that the insurance industry is a particular target. Insurance companies in the UK identified over 500,000 cases of potential fraud, amounting to £1.3 billion, in 2017 says the Association of British Insurers . In the US, the Coalition Against Insurance Fraud5 estimates that 3-4 per cent of all claims are fraudulent, costing the industry around $80 billion a year.
Clearly, the threat is significant and its geography diffuse, but the fightback is thwarted by a lack of precise and detailed information.
Nicholas Ryder, a professor in financial crime at the University of the West of England, says the situation is stark: “Financial institutions lack the overall view of the threat. I generally think corporations are pretty much in the dark over some of the threats posed by financial crime.”
Problems created by this incomplete picture are exacerbated by the industry’s traditional reluctance to share data. Such barriers – both within the industry and across national borders – are in stark contrast to the methods used by criminal gangs.
“Much of the criminal threat facing organisations is transnational,” says Professor Ryder. “Criminals are making huge sums of money.” The fact that these gains are often funnelled into other criminal enterprises gives a broader, societal dimension to the industry’s response to crime
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The enemy:
An international
criminal network
The enemy:
An international
criminal network
Fighting
fraud
from within
Fighting
fraud
from within
It's all
about
the data
It's all
about
the data
Bringing technical
expertise to
the boardroom
Bringing technical
expertise to
the boardroom
Fraud and
cyber are one
and the same
Fraud and
cyber are one
and the same
Conclusion
and what's
next
Conclusion
and what's
next
The enemy:
An international
criminal network
The enemy:
An international
criminal network
Fighting
fraud
from within
Fighting
fraud
from within
It's all
about
the data
It's all
about
the data
Bringing technical
expertise to
the boardroom
Bringing technical
expertise to
the boardroom
Fraud and
cyber are one
and the same
Fraud and
cyber are one
and the same
Conclusion
and what's
next