Identity Theft Protection in Indonesia: A Growing Concern for Insurance Companies
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The Rising Threat of Identity Fraud
A recent wave of identity fraud has been affecting insurance companies worldwide, with the dark web being rife with stolen and leaked personal data. With insurance companies migrating to digital platforms, it is now easier for fraudsters to falsify claims anonymously using new account fraud.
The Impact of Identity Theft on Companies Worldwide
The impact of identity theft on companies worldwide is alarming, with over 47% of companies being affected by this type of fraud. In Indonesia, the lack of awareness among citizens regarding the dangers of identity theft facilitates a breeding ground for fraudsters to exploit the nascent nature of the country’s emerging digital economy.
New Account Fraud (NAF)
New account fraud (NAF) is a type of identity theft in which a fraudster uses stolen or fabricated personal information to open financial accounts, credit cards, loans, or other services in someone else’s name without their knowledge or consent. Synthetic identities, which combine genuine and fake information, are being used by fraudsters to create new identities that are difficult to detect.
- Fraudsters use these false identities to obtain insurance policies for high-value items such as cars or property, and once these policies are in place, they file claims for non-existent losses.
- This type of fraud results in higher premiums for honest customers.
The Indonesian Financial Transaction Reports and Analysis Centre (PPATK)
The PPATK warns that fintech and cryptocurrency platforms may be targeted by organized crime due to their remote account opening, fast transactions, and real-time privacy. As of February 2022, suspicious activity reports indicate that fraud, including cyberfraud and breaches of electronic transaction laws, is the most frequently reported crime in the country.
The Covid-19 Pandemic and Its Impact on Fraud
The Covid-19 pandemic has contributed to the increasing activity in fraud, and efforts to address this issue remain inadequate due to unclear responsibilities and guidelines. Targeted measures based on a fraud risk assessment are recommended for future interventions.
Measures to Prevent Online-Based Frauds
Insurance companies may be targeted by fraudsters who attempt to purchase insurance policies using stolen identities or false information, which can result in significant losses for the company. The potential impacts of NAF include:
- Increased claims
- Higher premiums
- Reputational damage
- Increased regulatory scrutiny
eKYC Technology: A Solution to Prevent Online-Based Frauds
The most viable option to prevent online-based frauds such as identity theft and NAF is through the implementation of eKYC technology. Financial institutions in Indonesia have allocated an estimated budget of USD$88.9 million towards funding fraud prevention technology in 2020.
- eKYC allows businesses to verify the identity of their customers electronically, making it more difficult for fraudsters to create fake identities or use stolen identities to open accounts.
- It can also be used to authenticate customers during subsequent transactions, reducing the risk of account takeover and unauthorized access.
Implementing EMAS eKYC Systems
Innov8tif’s EMAS eKYC systems provide an integrated and extensive cybersecurity framework to protect both the interests of your business and your customers. Our products make extensive use of artificial intelligence to analyze and verify the identity of individuals to prevent instances of identity theft or new account fraud from occurring.
By implementing eKYC technology, insurance companies can protect themselves and their customers from identity theft and new account fraud, ensuring a safer and more secure digital environment for all stakeholders.