By FintechOS · September 21, 2021
7 minute read

KYC insurance: know your health and life insurance customers

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In the last two years, everything has become a remote, digital experience. From online shopping to ordering takeaway food, we’re all now reliant on the internet to access the goods and services we need.

Yet, as a vendor providing health and life insurance to consumers, this poses a challenge. When your customers had to visit you in-branch to access your services, you could confirm their identity. Now, however, transactions are largely anonymous. Not to mention, in-person visits to a doctor for health screenings may no longer be an option.

With regulators pushing more and more for you to crack down on fraud, how can you confirm that you know your customer when they’re on the other end of an internet transaction? That’s where the latest insurtech comes in.

How rising fraud led regulators to demand you know your customer

Insurance fraud causes USD 80 billion worth of damage to American consumers every year. While, in 2019, UK insurance companies registered 300 insurance frauds per day, with the average cost of each claim exceeding GBP 11,000.

Common life and health insurance fraud includes:

Fake illness

Fraudsters can falsely claim to have suffered an injury or have purchased medication, and claim re-imbursement for their losses. They may even have an accomplice report their death. They will often do this with assumed identities, meaning they can make several claims under different fraudulent policies.

Identity theft

Not to mention, criminals may obtain the documentation of a person (alive or dead), take out life insurance in their name, then claim again for their death or illness.

Forgery

The above claims and most other types of fraud involve the falsification of documentation. This is why regulators are pushing for insurers to confirm their customers are who they say they are.

Still, it isn’t only organized criminals who are committing insurance fraud. RGA research suggests over 10% of insurance customers “have no problem with people sticking it to insurance companies”. This attitude varies from not being opposed to insurance fraud to being comfortable with providing inaccurate medical information on insurance applications and claims.

With fraud being so prevalent and unopposed in public opinion, it’s no wonder regulators are applying pressure to insurers to put a stop to invalid claims. According to Arachnys, global fines for financial crime reached their highest level in 2020, and there’s an increasing focus on “know your customer” as the solution to the problem.

What is KYC for the life and health insurance industry?

In 1991, the first EU Directive explored an anti-money laundering (AML) framework. This set the standards that would come to be known as customer due diligence (CDD) and know your customer (KYC).

The 9/11 attacks then led to a US crack down on terrorist financing, which caused the world to become similarly tough on insurance fraud. Finally, in 2012, the US Financial Industry Regulatory Authority (FINRA) instituted Rule 2090 (Know Your Customer), stating that every broker-dealer should use reasonable effort to know and keep records on the essential facts of each customer.

This means you need to take responsibility for verifying the identity of your customers. It’s relatively simple to accomplish by asking them to send over a copy of their passport or driving license, and medical records. However, not only does this not confirm that the person taking out the insurance is the same one on the ID, but it also causes long delays in the onboarding process.

This is a particular issue, since 40% of online finance and insurance applications made each year are abandoned before submission. Any extension in the length of the process could lose you customers. Yet, the very nature of purchasing insurance in the modern day makes it difficult to connect with the people buying your products.

The anonymization of insurance customers

Online shopping for insurance is anonymizing the customer journey. In fact, your customers may no longer be fully aware from whom they’re buying their insurance.

Statista found that 75% of consumers aged between 35 and 44 had used price comparison sites in 2017, and the pandemic has only increased this usage. As such, the majority of your customers are likely more familiar with “Compare The Meerkat” than they are with your brand.

When you barely interact with your customers during onboarding, how can you guarantee that they are who they say they are? Well, developments in online technology have caused the issue, and it’s new insurtech that needs to resolve it.

Indeed, according to Deloitte, 48% of financial institutions said that outdated AML compliance tech was one of their biggest challenges. While Kyckr noted, “it is clear the financial industry needs better KYC and AML solutions.”

So, what can insurtech like FintechOS Northstar do to help insurers meet KYC compliance regulations?

How do you know your customer?

FintechOS Northstar is our insurance automation platform for building end-to-end digital customer journeys. Your customers’ experience and the products within the platform can be tailored to their needs and your internal processes. The system can be customized however you need it to be, but to reduce your time-to-market, you can make use of our low-code automation blocks.

Think of automation blocks like a train. Just as you’d choose an engine, passenger cars, dining cars, first and second-class carriages, then slot them together to make the train you need, you can add the tech you need for your customer processes to your platform. As your situation changes, you can add and create new blocks to suit your needs, and remove those you don’t.

Our automation blocks include artificial intelligence (AI) tools to collect customer information and integrate the latest automated solutions to support KYC, while avoiding a costly investment of your resources. The ready out-the-box automation blocks that come with the platform include:

eSign

It may be an essential nowadays, but that’s because you can’t afford to wait to send out your health and life insurance documentation, and for it to be returned, scanned, and approved. Allowing your customers to sign documentation remotely and immediately is the bare minimum, which is why it’s the first thing we’ve included.

OCR

Optical character recognition (OCR) tools allow text documents to not just be scanned, but read by the computer. This means customers can scan their identification and medical records with their mobile phones or computer cameras, and your platform will be able to record the information and verify its authenticity automatically. Your platform can give customers an instant approval decision without the need for your team to review documentation.

Facial recognition

Just as our OCR automation block can validate documentation, our AI facial recognition tool can confirm the person purchasing your insurance product is the same one in the identification documents. Customers can simply turn on their mobile or computer camera and the automation block will recognize their face and match it to their identification. This will confirm they are who they say they are and comply with KYC standards.

Liveness detection

Of course, what’s to stop a fraudulent customer from just holding up their passport to the camera again and fooling the facial recognition software? Our liveness detection AI tool will confirm that the platform is looking at a real person, rather than just a photo or video.

Integrated video calls

In the final case, where fraud is suspected or just if your organization prefers the personal touch, our platform can automatically connect your customer with one of your agents for a video call to confirm their identity. This can even be expanded to medical professionals in your organization to do a health screening remotely, when needed.

Flawless KYC compliance

Using our security automation blocks, you can comply with KYC standards, improve your time-to-market, and still offer an excellent customer experience. Not to mention, as regulation changes and KYC standards heighten in response to world events, we’ll add new automation blocks and tighten our platform’s security.

To find out more about how we can support you with KYC compliance, book a demo.

 

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Main photo credit: Pexels

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