It seems as though we hear about fraud everywhere today — credit card fraud, fraud against seniors, insurance fraud. It’s as prevalent as ever.
Fraud is also a significant concern for consumers and companies; one in four American consumers is a victim of financial fraud. According to LIMRA research, 79% of consumers are concerned about financial fraud, with 36% admitting that they are very concerned.
What is fraud, anyway? At LIMRA and LOMA, we define “fraud” as “an intentional act of deception or misrepresentation, resulting in financial or other losses for consumers and companies in the course of seemingly legitimate business transactions.”
Consumers believe preventing fraud should be a higher priority for more companies. Our research shows more than two-thirds of consumers wish companies would tell them more about their current efforts to combat fraud, and more than three-quarters believe that financial service companies should do more to protect retirement accounts from fraudulent activity. It’s a situation that worries companies and customers alike.
Not only are fraud attacks in the financial services industry on the rise, but the frequency of fraud attacks and their level of sophistication are increasing. That’s according to LOMA’s 2018 report “Current State Of Fraud In Life Insurance, Annuities And Retirement Plans.” As financial services firms are particularly vulnerable to fraudulent schemes, keeping up with increasingly sophisticated criminals is one of the greatest challenges facing the financial services industry today. Successful fraud prevention does not create competitive advantage; rather, it is an industry problem that demands cooperative industry solutions. An attack against one is a threat to all.
Our members are concerned and recognize the need to come together and take an offensive stance against the common enemy. Last year, LIMRA and LOMA initiated the formation of an organized community among our member companies to do just that.
In June 2018, we brought a community of fraud experts from 32 U.S. member companies together in Windsor, Conn., to begin this important conversation and define a common defense. A few months later, we hosted a groundbreaking hackathon where 30-plus fraud prevention experts and developers from member companies participated in the creation of an industrywide fraud prevention platform.
The result? FraudShare, an information-sharing and alert system that provides our members with alerts on fraud scheme threat levels, industry fraud experience benchmarks and access to a community of fraud prevention professionals.
The system ingests data about fraud incidents from participating companies into a secure, centralized database. It then analyzes the data and generates real-time alerts to designated users, including those in charge of fraud prevention, special investigations and customer-facing operations at member companies. The FraudShare database and alerts are highly actionable, simplifying a user’s fraud prevention efforts.
On its surface, FraudShare is a fraud information clearinghouse and alert system. But it is also a means of connecting fraud prevention operatives from across the industry. FraudShare is founded on the principle that we are stronger together.
Like a good neighborhood watch, FraudShare members can look out for each other and protect the industry at large. It is an innovative, easy-to-use tool for cross-industry communication about the types and frequency of account takeover fraud taking place in individual life, individual annuity and retirement plans. Built with input from a cross-section of the insurance and retirement industries, and a governance committee made up of 10 companies, FraudShare is made by the industry, for the industry.
As we come together to fight the common enemy, financial services companies also have an opportunity to come together with their customers. There is a lot on the line for everyone involved, from both a financial and a reputational standpoint. It’s no longer a question of if a fraud attempt will be made, but when.
How companies prepare their customers for a fraudulent attack and how they work with them afterward could be important factors directing the future of their relationship. Financial service companies know that increasing customer security is the most important part of their fraud prevention work. However, if customers in their neighborhood don’t feel more secure, the anti-fraud work may very well miss its mark.