Fraud risk management: An urgent need to build the right frameworks3 min read 23 Mar 2023, 11:23 PM IST
Inarguably, a robust fraud risk management framework can help insurance companies both anticipate and address the risk of various types of fraud, including the risk of cyber-attacks
Insurance companies have historically faced, and dealt with, several types of insurance frauds ranging from mis-selling of insurance products to leakages in commissions paid and inflated billing. Today, in addition to such frauds, insurance companies are faced with newer and more innovative fraudulent practices stemming from the pervasiveness of digitization. One such key risk that demands immediate attention is cyber security risk. Over the past few years, and especially in the aftermath of the covid-19 pandemic, the number of cyber attacks has grown dramatically. According to a Bank for International Settlements (BIS) bulletin, the financial sector has been hit relatively more often by cyber attacks than most other sectors since the pandemic with payment firms, insurers, and credit unions being especially impacted. This sharp growth in attacks comes on the heels of accelerated digital adoption in the insurance industry. As per a recent study on the Indian insurance industry, conducted by Deloitte, over 60% of survey respondents affirmed that they have witnessed a significant increase in fraud incidents in the last 2 years. Further, the top 3 reasons for an increase in fraud included increased digitization (70%) and remote working (50%), followed by weakened controls (30%).