Securing the Insurance Industry’s Digital Channels

Insurers continue to accelerate their digital transformation. Policy applications, claims submissions, and account management are now commonly managed through online portals, mobile apps, and self-service tools. This shift empowers insurers to meet rising customer expectations for instant responses, seamless onboarding, and 24/7 access, often from the convenience of a smartphone.

However, the same digital channels that offer convenience and speed have also opened up new vulnerabilities for fraud. Cybercriminals are exploiting these systems with increasingly sophisticated tactics, infiltrating accounts, falsifying claims, and committing fraud.

As insurers increasingly utilize technologies to protect their customers’ online experience and ensure their trust, they must do so without cumbersome tools and processes that may alienate legitimate customers. The challenge is clear: safeguard against fraud while keeping the customer journey fast, easy, and secure.

How Does Fraud Impact the Insurance Industry?

Insurance companies cannot afford to ignore identity fraud and the damage it can do to their business. The FBI estimates that the insurance industry loses approximately $40 billion annually due to fraud, with identity theft being a significant contributor. And it is not slowing down any time soon. The National Insurance Crime Bureau (NICB) anticipates a nearly 50% rise in insurance fraud linked to identity theft by the end of 2025.

The growth in digital channels makes it easier for cybercriminals to steal credentials, create fake identities and perpetuate complex schemes by exploiting the very systems designed to improve customer experiences.

Some examples of insurance fraud that are perpetrated by identity fraudsters include:

• Application Fraud: criminals use stolen identities, or create a synthetic identity by blending real and fake data, to open and get approved for new policies
• Claims Fraud: goes beyond traditional identity theft and can involve making false claims for a non-existent or on behalf of a real person
• Account Takeovers: an unauthorized personnel gains access to consumer accounts which can lead to data theft

These fraud attacks not only result in monetary losses to insurers each year but also erode customer trust and brand reputation.

What Considerations Should be Evaluated for an Anti-Fraud Approach?

When selecting a solution, insurance companies also needs to solve for the following challenges:

1. Customer Friction and Abandonment

Digital identity security is critical—but if the security tool is clunky or time-consuming, customers may choose to walk away. A lengthy application process with manual form-fill or too many documents to upload slows onboarding and builds frustration. In the authentication step, too many complex password rules, multi-step logins, and/or identity challenges can also increase friction and customer abandonment.

The consequences for insurers are measurable:

• Abandonment: Deloitte reports that poor digital onboarding experiences, characterized by long processes and excessive information requests, cause up to 40% of customers to abandon the process.
• Lost revenue: A frequently cited benchmark from McKinsey illustrates the scale of unrealized revenue from poor digital conversions: a 20% lift in online conversions produces ~US$400M in additional premiums for a $10B insurance carrier.
• Erosion of satisfaction: Bain & Company found that many digital claim attempts fail (39% in home, 33% in auto in one insurance study), and as customers switch to human channels, their satisfaction plunges.

2. Inefficiencies in Fraud Prevention Tactics

For many insurers, fraud prevention tactics still rely heavily on manual effort which is time and resource intensive. The verification and fraud risk indicators can often be in different systems across the organization, which slows approval and delays onboarding. With traditional authentication methods such as passwords, service agents and IT must often manually intervene for resets and troubleshooting. Relying on these inefficient, manual processes drives up costs as well as customer turnover due to friction.

3. Compliance and Risk

As a highly regulated industry, maintaining operational integrity and minimizing risk is crucial. Compliance with federal Know Your Customer (KYC) and Anti-Money Laundering (AML) laws protects both insurers and customers. These regulations are vital for customer identification and ongoing monitoring for suspicious activities such as identity fraud, cybercrime, money laundering, and more.   Given the large volumes of sensitive personal and financial data collected and stored, insurers are subject to strict data privacy and security mandates (such as GDPR in Europe, and California Consumer Privacy Act to assure sensitive policyholder data is safeguarded. Non-compliance can result in monetary fines, operational restrictions and even criminal charges.

Why Do Insurers Need a Multi-Layered Approach to Identity Verification?

Zumigo helps insurers protect against costly financial losses and reputational damage by strengthening fraud prevention and identity verification at every stage of the customer journey using a multi-layer identity verification and authentication approach. Powered by real-time data, Zumigo analyzes different signals from mobile account and device activities, various aspects of a digital identity, financial accounts, and other digital footprints to detect risks. With this approach, insurers can reduce false positives/negatives of their assessments, and detect complex fraud like synthetic identity abuse that impact their business.

To simplify the online experience, Zumigo allows insurers to offer their customers passwordless authentication using FIDO-based passkeys and silent network authentication, ensuring security and ease of use.

With faster, easier, and more secure interactions, insurers can create a smoother digital experience that leads to higher customer satisfaction, stronger trust, and greater long-term loyalty. This balance of security and convenience ensures that legitimate customers are welcomed seamlessly, while fraudulent activity is stopped in its tracks.

In addition, Zumigo drives meaningful operational efficiency and cost savings by automating processes, reducing manual errors, and minimizing the burden on customer support teams, and complying with regulations. Using a modern, secure, and user-friendly platform allows insurance companies to gain a clear competitive advantage as innovative, customer-focused leaders in a rapidly changing market.

What Are Some Key Insurance Use Cases That Zumigo Supports?

Zumigo solutions give insurers the tools to address fraud vulnerabilities and conversion challenges across the digital customer journey. Some examples include:

• Prevent Application Fraud: During policy application and onboarding, Zumigo enables automated identity verification by leveraging mobile, device, and digital signals in real time. This eliminates the need for slow manual reviews, speeds up approval decisions, and minimizes application abandonment by removing friction from the process.
• Prevent Claims Fraud: In claims processing, Zumigo helps insurers verify both claimant identity and bank account ownership, ensuring that payouts are directed to the rightful individual. It also strengthens the security of claims portals and communications, protecting customers from unauthorized access or account takeovers.
• Prevent Account Takeover Fraud: Beyond onboarding and claims, Zumigo delivers secure, seamless authentication for self-service portals and call centers so that unauthorized personnel cannot gain access to legitimate customer accounts for theft of personal information.

Additionally, the solution supports agent and broker verification, verifying the identity and authenticity of intermediaries before they can access internal systems or sensitive customer data, reducing the risk of insider fraud or unauthorized activity.

Looking Ahead to Secure Digital Evolution

The insurance industry’s digital evolution is here to stay. Unfortunately, so is the rising tide of fraud. The increasing reliance on digital channels necessitates a multi-layered approach to combat mobile identity fraud effectively. For identity and access management leaders, the mission is to secure every interaction without creating barriers for legitimate customers.

By embracing advanced technology, prioritizing robust identity verification processes, and fostering cross-industry collaboration, insurers can enhance their fraud detection capabilities, reduce financial losses, and protect their customers.

Yu-Ting Huang is Sr. Director of Marketing at Zumigo. Comment or questions? Find her at on LinkedIn @yutinghuang.