Why Digital KYC is Important for Insurance Fraud Prevention
KYC For Insurance Companies : Basically, a system that can carry out real-time identity verification, background checks, and detect possible forgeries in documents. Such systems exist in the form of digital KYC service providers.
Insurance fraud is a stark reality and many people who commit such frauds do not realise that their actions result in higher premium rates that have to be paid by other people. On average, insurance companies lose around $30 Billion a year due to fraud. The costs of these frauds are borne by honest, hard-working people. There is an urgent need for fraud prevention systems in the insurance industry. Although, there are insurance investigators that work in high-profile cases and also the cost of carrying out an investigation is borne by the good honest people.
Moreover, it is the smaller cases that cause the most harm as they are ignored and add up to become a hefty amount. Although background checks are usually done in the insurance industry and they should be, as they can help point out money launderers, if not the fraudsters. The reason is that most people who carry out insurance fraud rely on fake or stolen identities to carry out their scams. Secure processes that are fraud-proof is the need of the hour. as we proceed with the article we will discuss how KYC services providers can assist the insurance industry. We will also discuss the things to look for when searching for such a service provider.
Frauds That can be Stopped Through Secure Processes : KYC For Insurance
Although there are many types of frauds that happen with insurance companies, yet there are some that can be easily avoided by applying secure processes.
Fronting: In this type of fraud the insurance policy is taken out using the details of another person to get favourable terms such as lower rates on premiums. Criminals or fraudsters usually rely on this method to carry out their fraudulent activities. They use fake or stolen identities to present themselves as someone else and create fake documents to support their taken identity. KYC service providers can easily weed out such attempts and prevent them from happening.
Money Laundering: is a global problem. Insurance companies too are frequently targeted to launder money. The products offered by insurance companies and the processes that are associated with them make it easy for money laundering. Life insurance policies are extremely lucrative to money launderers as they allow for large premium deposits. Money Launderers take out such policies and deposit large amounts of money while cancelling the policies after a while. They do suffer some loss but the amount they receive back is effectively laundered. KYC service providers that allow for background checks can help curtail these types of frauds.
How Digital KYC Services Ensure Fraud Prevention
Digital KYC service providers rely on state-of-the-art AI to carry out multiple checks. The software that can be integrated with all known systems. It uses the Internet, a webcam or a smartphone camera to carry out its verifications and background checks.
In the case of fronting, this would prove an invaluable tool. The process of verifying a person for a policy would include;
- The person wishing to acquire a certain policy would fill out the required information and after submitting it would be redirected by the verification system.
- The person is asked to present proof of identity documents in front of the camera and to focus one by one on the required verification parameter such as name, DOB, address, etc.
- The AI checks the documents for signs of tampering or forgery. The picture is matched with the face of the person and the data is matched with the provided data that the customer submitted initially. The entire process is recorded and done in less than a minute.
- There they would be asked to face their webcam or their smartphone selfie camera after getting a special link.
In the case of fraud prevention related to money laundering, the process would be the same. But if the company has opted for AML (Anti Money Laundering) screening checks then the AI would simultaneously check thousands of global watchlists for any sign of money laundering suspicion or prior conviction.
What to look for in a Good Digital KYC Services Provider?
Having mentioned the value of verification services it must be said that not all companies offering fraud prevention services are the same. Companies understand that customers do not like long waiting times or lengthy onboarding processes. This is why it is important that insurance providers take on a KYC service provider that is efficient as well as effective.
Shufti Pro’s digital KYC solution implements advanced machine learning and AI systems to catch documentation fraud, identity theft and offers liveness detection. It offers a hybrid solution that includes a backup of human intelligence along with the AI that verifies the results from the AI for false positives. This lends more accuracy to the entire process and all this is done in seconds as well.