ATLANTA — LexisNexis Risk Solutions today released its annual LexisNexis® Fraud Mitigation Study, which found that people who commit fraud in one industry are increasingly emboldened to exploit other industries, too, giving organizations greater incentive to fight fraud cooperatively by sharing fraud data. The study also found that as these organizations add security measures to prevent fraud – particularly online – they may risk diminishing the customer experience.
The third-annual study surveyed more than 800 fraud mitigation professionals from financial services, insurance, health care, retail, communications and government to gauge trends and patterns related to fraud. It found that cross-industry fraud is widespread, with 84 percent of professionals saying that some fraud cases they investigated were connected to other industries. An insurance fraud scheme to stage an auto accident, for example, could also see the perpetrator exploit system gaps to fraudulently claim government benefits or participate in telecommunications, retail or payment card fraud.
The study found cross-industry fraud is also costly, with 78 percent of fraud cases having moderate to high impact, and nearly half (48 percent) causing extreme financial impact. The estimated annual combined cost is in the billions of dollars of losses, with fraud mitigation professionals saying their biggest concerns stem from identity theft (41 percent), hacking (36 percent), employee fraud (33 percent) and claims fraud (31 percent).
“Fraud has become more pervasive and costly over time, and today’s criminals are more sophisticated than ever, with an increasing number of fraud schemes affecting multiple organizations across multiple industries,” said Bill Madison, CEO, Insurance, LexisNexis Risk Solutions. “The good news is that organizations are realizing the value of working together to fight fraud by sharing information within and across business and government sectors so that they can better address the consumers who need their services.”
Interest is growing among fraud mitigators to utilize fraud data from other organizations, both within their own industries and from other industries. 84 percent of professionals said that more access to industry fraud would be valuable and 80 percent see access to outside-industry data as very valuable.
This has led to increased interest in sharing data in a common cause to fight fraud. 86 percent of professionals said they would consider contributing their investigative outcomes to a contributory database if they could receive the outcomes data back from other industries. Insurance companies, in particular, place a high value on data coming from organizations outside their industry (along with financial organizations) because they experience widespread cross-industry fraud and believe it has a high financial impact on their organization, the study revealed. Retailers are also keen on cross-industry cooperation because of the increasing threats of identify fraud in the industry.
“LexisNexis Risk Solutions’ Fraud Mitigation Study spotlights prominent fraud trends impacting retailers and highlights the need for fraud and information security teams to engage across multiple industries in a concerted effort to strengthen collective fraud defense capabilities,” said Jennifer McGoldrick-Stenberg, Engagement Director, Retail Cyber Intelligence Sharing Center (R-CISC). “As the study suggests, a common obstacle facing retailers is identifying solutions to fight the rising tide of identity and other fraud activities that impact customer accounts. In an effort to mitigate this challenge for the industry, the Retail Cyber Intelligence Sharing Center (R-CISC), which houses the Retail ISAC, has formed a retail-focused Fraud Working Group to formulate solutions and strategies to protect against customer account takeover and gift card fraud activities. The group acts as a mechanism for driving collaboration across the retail spectrum, with participants from member companies including CashStar, Darden, Hyatt Hotels Corp., Jo-Ann Stores, Publix, QVC, Ulta and Synchrony Financial, all focused on a common goal: to produce outcomes that demonstrably mitigate losses and the effect of fraud on customers.”
As organizations incorporate more external data and analytics, fraud mitigation professionals are using the technology primarily for behavioral analytics and predictive modeling, representing a slight shift from previous years where they also favored automated business rules to fight fraud. More than three-quarters of professionals said they use both external data (79 percent) and analytics (77 percent) to fight fraud now. “This change may reflect the increasing sophistication in fraud mitigation methodologies,” Madison said.
Other key findings in the 2017 Fraud Mitigation Study include:
About LexisNexis Risk Solutions
LexisNexis Risk Solutions harnesses the power of data and advanced analytics to provide insights that help businesses and governmental entities reduce risk and improve decisions to benefit people around the globe. We provide data and technology solutions for a wide range of industries including insurance, financial services, healthcare and government. Headquartered in metro Atlanta, Georgia, we have offices throughout the world and are part of RELX (LSE: REL/NYSE: RELX), a global provider of information and analytics for professional and business customers across industries. For more information, please visit www.risk.lexisnexis.com and www.relx.com.