How Insurers Can Better Protect Customers

Fraud and scams pull at the fabric of society and are estimated to account for over 40% of crime in England and Wales. This activity hurts victims financially and emotionally, and for the wider population drives up the cost of living through increased insurance premiums and retail prices. Ultimately, every consumer should be considered vulnerable to fraud threats, and it’s important insurance providers are focused on tackling such incidents that typically include:

• Account takeover (ATO): This occurs when a cybercriminal gains access to the victim's login credentials to steal funds or information
• Impersonation fraud: This can have significant financial and mental impacts on a victim and make them vulnerable to repeated fraud and scam attempts
• Authorised push payment fraud: A type of social engineering (anything from simple phishing techniques to creative and elaborate schemes) where consumers are tricked into sending a payment to someone who’s not who they claim to be (often posing as the victim’s own bank or members of their family)
• Ghost broking: This describes a fraudster who pretends to be a genuine insurance broker selling car insurance
• False claims: This happens when fraudsters upload manipulated imagery and documentation for a ‘fake’ claim

To this end, regulations like the UK 2023 Fraud Strategy and Economic Crime and Corporate Transparency Act 2023 are designed to improve the way businesses counter fraud and scams to protect customers. The latter will come into force on a piecemeal basis and requires large organisations to evidence they have robust fraud prevention processes in place. Investing in the detection and prevention of financial crime through advanced customer identification and authentication solutions, fraud analytics and partnerships can strengthen this work.

In England and Wales, the number of people aged 65+ years has increased from 9.2 million in 2011 to over 11 million in 2021.

Nick Dumonde, Head of Market Strategy – Insurance, observes how older consumers with pension pots (typically running from tens of thousands of pounds to hundreds of thousands) are potentially at risk: “Older consumers are naturally attractive targets for fraudsters. Firstly, they’re non-digital natives, so assumed easier to scam. Our research shows two-thirds of Baby Boomers are most concerned about being a victim of identity theft.

“Secondly, pensioners are perceived to be well off, even if the reality is large numbers of people aged over 65 live financially precarious lives, with 2.1 million living in relative poverty [almost 1 in 5 people in this age group].”

Drilling into these different generations, two subsets seem particularly vulnerable.

The first are consumers who hit 55 and have accumulated a significant lump sum. The total number of pension plans accessed for the first time in 2022–23 was 739,535, with over £43,199 million being withdrawn from pension pots in the same period. Pension engagement tends to increase with age, and these individuals can now withdraw a chunk of money. It’s likely many of these consumers will be working and have accumulated various pensions during their careers, some of which they may not be able to trace or have yet to set up online accounts for.

The second group are those 75+ years old who are potentially more vulnerable to scams.

“It’s important providers look for signs of vulnerability, and have robust identity and authentication processes in place. Where they spot a vulnerability, it’s vital to take extra steps. In June 2022, the Financial Conduct Authority brought in a requirement called Strong Nudge in which pensions providers must give consumers a clearer push toward Pension Wise guidance when they decide to access their pension savings,” explains Dumonde. “This adds a layer of protection when consumers seek to remove money from their pots, and helps guard them against poor decision-making or being scammed or misled by third parties.”

These examples emphasise the importance of knowing your customer and ensuring you’re protecting them and their accounts. Checks should involve robust and consistent identity authentication protocols, knowing channel and communication preferences, and helping customers learn how to spot policies from trusted sources as well as signs of a scam. Additionally, the nature of the age group means you should consider alternative data sources that alert you to non-financial vulnerabilities, and consider empowering customers through credit and dark web monitoring tools. Both approaches could be part of a brand play designed to increase platform accessibility and usage — and create differentiation in the industry.

TransUnion data solutions and consultancy teams can help you design optimal detection and prevention strategies throughout the customer journey — strengthening consumer trust and transforming performance. Our Protecting Vulnerable Consumers From Bad Actors ebook highlights some of the consumer groups who are vulnerable to fraudsters and criminals and outlines various ways businesses can support consumers and mitigate these threats.

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