The need to stay ahead of sophisticated bad actors
Technology is advancing at a rapid pace and, in turn, cyber attacks are becoming more sophisticated and difficult to detect. Firms in traditionally lower-risk industries, such as insurance, have become more vulnerable to such attacks. This means that fraud and financial crime in the insurance industry have become increasingly prevalent, with insurance products and services a prime target for fraud. Insurance fraud imposes significant costs on insurance companies, and results in higher premiums for policyholders.
Our 2022 Global Economic Crime and Fraud Survey revealed that 46% of respondents’ firms had been exposed to fraud or financial crime within the previous 24 months. To address the resulting regulatory pressures and higher compliance standards, firms will need to invest in building more sophisticated financial crime controls.
Financial crime in the insurance industry: Key issues
As technology advances, criminals’ tactics evolve too. Financial crime is an increasingly ubiquitous threat and it’s becoming more challenging to mitigate. The insurance sector in particular has become more susceptible to financial crime risk, given its size, diversity, complexity of product offerings and range of delivery channels.
Insurance offerings are an attractive target for financial crime through fraud, sanctions, bribery, corruption and other avenues. Despite this, insurers have relatively immature risk control frameworks compared to their banking sector counterparts.
In the US alone, industry organisations such as the Coalition Against Insurance Fraud have estimated that insurance fraud costs $308.6 bn annually. It’s a risk that imposes significant costs on insurance companies and results in higher premiums for policyholders.
In today’s increasingly complex regulatory landscape, insurers and brokers face greater scrutiny of controls and potential penalties for identified failings. Organisations that are not proactive about identifying financial crime open themselves to the risk of millions in fines and severe reputational damage.
As a result, insurers are feeling pressure to enhance crime prevention and detection measures, which leads to increased compliance costs. Firms must also find ways to address compliance requirements without detracting from their core business activities.
With growing regulatory burdens and increasingly severe penalties for non-compliance, the insurance industry can’t simply add resources to do more of the same. To effectively address the rising threat of financial crime, insurance firms require a fresh approach.
How we can help
At PwC, we want to help our clients prepare for the future. To this end, we have developed an operational delivery approach built around cutting-edge technologies to provide innovative, long-term solutions. Using this, insurers can focus on their core business activities with the confidence that their compliance processes are taken care of.
- Our integrated approach
- Embracing technology and expertise
Our integrated approach
Preventing and detecting financial crime is a leading challenge for financial institutions, which face risks of not just monetary losses, but also loss of organisational reputation, brand value, culture and relationships. Our integrated approach to mitigating the risks of financial crime helps protect your organisation and empowers you with the confidence to move forward boldly.
At PwC, we bring together the functional capabilities to effectively address modern threats that create significant business, regulatory and reputational risks. We provide you with access to leading technologies, industry knowledge, expertise and innovative solutions to help you to detect and prevent financial crime.
Embracing technology and expertise
PwC’s financial crime services are built on our industry-leading community of solvers, bringing together our full range of expertise across many areas. We help you assess your security, get your technology ready for the future and ensure your operations are compliant, enabling you to move confidently into the future and build trust as you transform.
We have a suite of technology assets that can undertake root cause analysis, establish fact patterns and analyse complex scenarios. These technologies are designed specifically for the insurance sector.
Our technology assets—combined with subject matter experts with deep market knowledge in the areas of financial crime, fraud, intelligence and insurance—enable us to help our clients build trust in society and to work with them to fulfil their regulatory obligations.
Financial crime in the insurance industry: Featured content
Insights into UK financial crime
Shedding light on the current state of financial crime, the PwC UK Financial Crime Insights Survey: Insurance and Asset/Wealth Management (AWM) Sector Focus looks at the lessons our survey respondents from the insurance and AWM sectors have learned while fighting financial crime during the challenging market conditions of recent years.
The managed services approach to fighting financial crime
Fighting financial crime requires time, effort and expertise, and the cost of mitigating risks is rising. That’s why we’ve created a managed services approach to financial crime risk remediation, compliance and upskilling. This enables our clients to focus on their core business while we work to identify, prevent and resolve incidents of fraud and financial crime.
Footnote: Coalition Against Insurance Fraud The Impact Of Insurance Fraud On the U.S. Economy /2022
Contact us
Harry Holdstock
Fraud and Regulatory Protection Leader, PwC United Kingdom
Tel: +44 (0)7706 284348
Frank Pinder
Insurance Fraud and Financial Crimes, Managing Director, PwC US
Tel: +1 (407) 375 7567
Damian Kalinowski
Financial Crime Unit and Managed Service Lead, PwC Poland
Tel: +48 519 507 197