Insurance fraud: definition and issues

ALFA estimated the amount of insurance fraud in 2022 in France at 587 million euros, making it a major challenge for the sector. Fraud takes many forms, from dishonest underwriting to fabricating false documents, and it also occurs at different stages of the customer journey. In this article, let's explore the different facets of insurance fraud, its financial and reputational implications, and ways to prevent it.

What is insurance fraud?

Insurance fraud occurs when individuals or entities manipulate the insurance system. The Alfa (Agency for the Fight against Insurance Fraud) defines it as “an intentional act, carried out by a legal or natural person, in order to unduly obtain a profit from the insurance contract”. 

This fraud can occur at different stages of the customer journey, from initial subscription to claims reporting. 

Unfortunately, these acts have significant repercussions on the financial balance of insurers and, by extension, on the policyholders themselves, which we will discover later in this article. 

To take stock of insurance players: zoom on the different insurance sectors

The different types of insurance fraud

When you take out insurance or wish to report a claim, it is obligatory to provide different types of documents, such as identity documents, RIB or even supporting documents such as invoices or certificates. bonus/penalty. 

We speak of insurance fraud when this information is manipulated in order to unduly obtain a profit from the company. 

We thus distinguish two types of insurance fraud, including subscription fraud – which occurs in particular in the KYC procedure – and declaration fraud. These are mainly documentary fraud.

1. Subscription fraud or KYC (Know Your Client)

Some fraudsters seek to distort the insurance subscription process by providing false documents. They can thus usurp someone's identity or even hide relevant background, such as bonus/malus certificates when taking out car insurance.

By doing so, they can benefit from insurance subscription at a lower cost. In France, it is estimated that one in ten people have already committed subscription fraud, according to a YouGov poll. 

2. Declaration fraud

Another common form of insurance fraud occurs when filing claims. Fraudsters falsify documents to, most often, exaggerate the damage suffered. They thus declare non-existent assets or claim fictitious claims to receive compensation to which they are not entitled. 

In 2018, Insurance Argus estimated to 2 billion euros the amount defrauded in the case of property and casualty insurance, i.e. everything relating to fires, accidents and various risks.

As you can imagine, such figures inevitably have serious impacts on the health of insurance companies. But then what are they?

The risks of documentary fraud in insurance

Financial losses, impact on premiums or even on the reputation of an insurance company. Document fraud has consequences both on companies and on customers. Let's see them in detail.

1. Financial losses

Insurance fraud generates significant financial losses for insurance companies. Compensation paid fraudulently accumulates, directly impacting the financial results of insurers and increasing costs for all policyholders. 

2. Impact on premiums

Insurance premiums are directly influenced by the level of fraud within a company. The costs associated with fraud are often shared among policyholders, leading to increased premiums to compensate for losses incurred.

3. Deterioration of reputation

Customer trust is an essential pillar of the insurance industry. When cases of fraud emerge, the company's reputation is tarnished, deterring new customers and leading to potential flight of existing customers.

4. Legal sanctions

In addition to the financial consequences, fraud exposes both fraudsters and insurance companies to legal sanctions. 

🎧 To listen to
Discover the exclusive interview with Maxence Bizien, general director of Alfa, at the microphone of Marc de Beaucorps, for the Chasseurs de Fraudes podcast from Finovox!

How to fight insurance fraud with Finovox?

To effectively combat insurance fraud, there are many effective tools such as fake document detection software. These advanced technologies, based on artificial intelligence, make it possible to detect all false documents during subscription but also during declaration. 

The Finovox false document detection solution is a powerful ally in the fight against insurance fraud. Incorporating sophisticated algorithms, Finovox provides early detection of fraud attempts, minimizing financial losses and preserving the reputation of insurance companies. 

Using Finovox during your underwriting and reporting processes

During the subscription and declaration processes, Finovox ensures that your future client does not use false documents thanks to several features.

Among them, we note consistency analysis. This is the main component of our control process. Using it, we check whether the information provided is consistent and matches from one document to another. We also note in-depth visual analysis and computational analysis which make it possible to detect signs of automatic generation or electronic falsification of a document. 

Finovox detects fraud on 100% documents. 

Would you like to know more about our solution? 

Contact our experts!