Canadian Digital Fraudsters Increasingly Target Insurance Industry in First Half of 2022

According to a TransUnion Canada TruValidate study, for the second consecutive quarter, the rate of suspected global digital fraud attempts in the insurance industry experienced the greatest rise on a year-over-year basis, increasing 159% between Q2 2021 and Q2 2022 (+125% originating from Canada). This follows a 134% global increase between Q1 2021 and Q1 2022 (+151% originating from Canada). Despite this rise in suspected fraud against the insurance industry, TransUnion’s (NYSE:TRU) quarterly fraud analysis observed that the overall rate of suspected digital fraud attempts across industries globally declined by approximately -14% between Q2 2021 and Q2 2022. In Canada, suspected digital fraud attempts decreased -37% in the same timeframe.

TransUnion observed declines in the rate of suspected digital fraud attempts from Canada-based transactions across a number of industries including: gaming (-66%), financial services (-52%), retail (-31%), telecommunications (-13%), travel and leisure (-6%) and logistics (-3%).

Conversely, the only industries beyond insurance that experienced increases in suspected digital fraud attempts originating from Canada year-over-year in Q2 2022 included communities such as online dating, forums, etc. (+10%) and gambling (+8%). However, the types of fraud each of these three industries experienced were very different. First-party application fraud was the top insurance-focused digital fraud globally impacting that industry. This type of fraud involves fraudulent applications containing intentionally inaccurate or manipulated information provided by the policyholder with the intention of receiving certification, lower rates or better terms for a policy/contract. Whereas other communities were dominated by profile misrepresentation, which is when users post inaccurate information in a profile and/or use bogus profile photos.

“In recent years, we’ve seen fraudsters shift their industry focus each quarter as they recognize that businesses have put more controls in place. These fraudsters are like chameleons – always adapting,” said Patrick Boudreau, head of identity management and fraud solutions at TransUnion Canada. “We have observed interesting trends in the first half of 2022 with suspected fraudulent activity in the insurance industry spiking during the first six months of the year. At this time, we believe the insurance industry is seeing more ‘soft fraud’ – meaning when a policyholder misrepresents certain information or circumstances in an effort to lower the policy’s premium. It may be that some consumers are representing their policies incorrectly to try to save money, especially in a high inflation environment that places more pressure on their wallets.”

Digital fraud continues to be a constant in the lives of many Canadian consumers. TransUnion’s latest Consumer Pulse study found that about 3 in 10 (31%) Canadian adults reported experiencing digital fraud attempts. And 7% fell victim to fraud such as phishing, identity theft or other types of fraud.

Suspected Digital Fraud Attempts Shift to New Industries Globally vs. Canada

“The digital acceleration brought about by the pandemic has permeated industries that have traditionally operated offline, which fraudsters are trying to capitalize on,” said Boudreau. “At the same time, for the industries that are finding fraud instances starting to stabilize, the focus has shifted to identifying the ‘good’ transactions and enabling them to sift through with less friction. For many industries and businesses, it is a challenge to balance implementing the necessary security measures to help weed out potential fraudsters – without creating friction for their genuine customers. Strong fraud and authentication practices can dramatically decrease false positives and focus fraud-fighting resources on the minority of interactions that warrant scrutiny. By reducing the pool of manual reviews and customer interrogations, organizations can dramatically reduce costs, increase revenue and improve the overall customer experience.”