Soon after the first insurance policy was written, and the first investment account was opened, criminals began looking for ways to misappropriate funds. From the beginning, financial services companies have grappled with the challenge of creating a seamless customer experience, while also providing a level of security that protects both the company and the customer.
In the current environment of the internet and advanced technology, this problem compounds exponentially. While the latest tech allows for easier and smoother business processes for consumers, it also opens up new avenues for criminal activity. The very defenses that companies set up to combat fraudsters can negatively affect the customer experience that they work so hard to cultivate.
A Growing Threat
The fraud threat is growing and continues to reach further into the financial services landscape. A LIMRA survey conducted in June 2018 found that three product lines in particular experienced the greatest increase in attempted fraud: individual life insurance (76%), individual annuities (75%) and retirement plans (52%). In eight out of 10 instances, the increases are related to attempts at account takeover.
In 2016, losses from account takeovers in the U.S. equaled $2.3 billion, an increase of 61% from 2015, a Javelin Strategy and Research study revealed. Takeover attacks are up 210% over 2016. Today, 10 new account takeover attempts are launched every second. The payoff is huge for the attackers — garnering them more than $5 billion in 2017, a 120% increase in just one year, a ThreatMetrix Cybercrime Report said.
Criminals have begun to target the life and retirement industries in earnest, with more sophisticated attempts to take over client accounts, to strip retirement plans of savings and to perpetrate fraudulent withdrawals. Institutional retirement operations and life operations are particularly vulnerable.
Financial services companies hold trillions of dollars in assets through retirement accounts, permanent life policies and annuities; and fraudsters are looking for vulnerabilities in systems. It was inevitable that in response to these attacks, the industry would create more effective identity authentication defenses — perhaps to the detriment of consumer experience.
The Customer Experience Challenge
Solving the riddle of combating fraud while maintaining a positive customer experience has ramifications on several fronts. Fraud can damage a company’s reputation, customer experience and loyalty, shareholder confidence, and financial results. It can be a difficult trade off; good security protocols may make it more difficult to create a quick and easy customer experience.
In addition, often the customer, rather than the company, discovers the fraud. This can shake consumer faith in the companies they work with, resulting in serious financial and reputational consequences.
The challenge for companies can involve a wide range of customer touchpoints. According to LIMRA survey findings, since January 2017 the channels seeing increased fraud attempts include interactive voice response systems (33%), financial professional portals (37%), the customer website (73%), and the contact center (80%).
A significant risk for contact centers is “social engineering fraud” in which fraudsters — possessing basic customer information such as name, address, Social Security number and date of birth — use their understanding of a company’s business processes and a representative’s genuine desire to help, to take over actual customer accounts and withdraw funds.
How Can We Help
As companies work toward creating a better customer experience, while also providing an increased level of security, they are reviewing policies and procedures, updating training programs and implementing new identity authentication protocols.
Last year, LIMRA and LOMA launched an industry fraud initiative designed to help companies understand the evolving nature of fraud, its implications, and ways to help foresee fraud and enable companies to deliver a customer experience that is consistent with expectations. The latest tool to come out of these efforts — FraudShare — is an information sharing and alert system that will help companies differentiate between actual customers and fraudsters.
While the industry strives to create exceptional customer experiences that will both attract and retain clients, criminals are looking for ways to exploit new access to personally identifiable information and their understanding of our processes to their advantage.
It is a cat-and-mouse game — the industry against the fraudsters. Working together, we can, and will, find ways to preserve and enhance the customer experience while keeping fraudsters at bay.