It’s no secret that the digital innovations we love come at a price. The Internet and all its convenience, mobile devices containing a wealth of personal information, and global real-time communication have become indispensable to most of us. Yet the digital revolution has created enormous opportunities for the perpetrators of fraud and other financial crime, affecting consumers and corporations alike.
Estimates of losses to cyber-crime range from a few hundred million up to a trillion dollars1. Security and data breaches can result in multi-million-dollar losses.
The increasingly sophisticated techniques used by cyber-criminals have led insurers to pursue new approaches to preventing and detecting such activities. New technologies and solutions can make it easier for insurers not only to assemble the integrated data they need to combat crime, but to bring sophisticated analytics to bear, generating useful insights to help them detect and prevent the efforts of fraudsters and other digital criminals.
There are three major elements needed to make this happen:
Enhancing the Quality of Data.The quality of insights gained will depend on the quality of data provided. Insurers use a variety of internal and external data sources to fight fraud and financial crime, but many struggle with data quality. To address this they need to define the right data-quality metrics, and then establish central data screening and reconciliation. Another step is to improve data governance, which may require the appointment of a chief data officer.
Transforming Data into Information into Insight. A lack of data is usually not the problem; it’s the lack of the right data. Transforming data into insight is a three-step challenge, involving 1) identifying the data required; 2) using technology to collect the right data; and 3) analyzing the information to transform it into actionable insight. There are tactical changes which insurers can make to obtain more information from data, including use of analytics techniques such as text mining. Ultimately, though, information is only useful if it can be acted upon. This requires alignment of processes and people, along with coordination and empowerment to make use of the information.
Applying Data Visualization Techniques. As the volume and complexity of data increase, key software providers are adopting data visualization techniques allowing complex data to be viewed by business experts through a visual interface. This helps them look for visual patterns and identify inconsistencies.
Insurers are seeking to ensure cyber-security and to move toward new global standards as established by regulators. Data provides the greatest challenges and the most significant opportunities for insurers to transform their financial crime capabilities, but using data to drive a more integrated approach requires centralization of data.
By using big data technologies to provide centralized access to data – rather than centralized storage – insurance companies can employ analytics to obtain valuable insights and make informed decisions quickly and flexibly. Insurers and other financial services firms need this kind of agility and adaptability more than ever, given the rapid evolution of fraud and financial crime and the ever-increasing stringency of regulatory requirements.
1The Economic Impact of Cybercrime and Cyber Espionage, Centre for Strategic and International Studies,” McAfee, July 2013.