Insurance Fraud & Ad Fraud
We tend to spend a good portion of time focusing on fraud that impacts financial institutions and merchants. However, there are other industries suffering from mounting fraud losses and challenging attacks. Here we will dive into a couple of those use cases, explaining how technology can help fight back.
The two areas we will focus on: ad fraud and insurance fraud. The former takes place when individuals defraud businesses via their digital advertising networks. Whereas the latter consists of an act which defrauds the insurance process. This can either be when the claimant attempts to claim reparations which they are not entitled to, or when the insurer denies the claimant of their entitlement.
An estimation in 2019 revealed that companies lose $5.8 billion as a result of ad fraud every year. Despite this shockingly high number, the actual figure is believed to be much greater. Underdeveloped technology serves as a major obstacle to protecting advertisers, meanwhile certain types of ad fraud can be very hard to detect.
Cyber criminals use various methods to carry out ad fraud. Hidden ads constitute one way in which this is perpetrated. Hidden ads display the advertisements in a 1×1 pixel iframe meaning it is not visible to the viewer, yet it still generates revenue for the publisher.
Another way ad fraud is carried out is through hijacking ads and clicks. This form of fraudulent deception refers to the event in which the attacker displays an ad in a manner which generates themselves money rather than the publisher. Similarly, hijacking clicks redirects the user to the attackers site and therefore the advertiser loses out on a potential customer. The hijackers are able to do this by compromising: the user’s computer to change the DNS resolver, the publisher’s website or the user’s computer to change the HTML content on the fly or click and the user’s proxy server or router (or the ISP’s router) to spoof the DNS server.
Additionally, bots pose a major problem in the ad fraud sector. The most disruptive example to date is MethBot, which managed to fraudulently acquire $3-5 million from advertising per day. MethBot was incredibly hard to detect due to the use of fake clicks and mouse movements, fake social network login information, fake geolocation and dedicated proxy servers hindering the tracking of the traffic to a specific source.
The ad fraud schemes mentioned above are just a few of many in which fraudsters use to suck funds out of a budget. Luckily, in recent years various technologies have come a long way in an attempt to limit such behaviors. These include ad delivery and visibility measurement, bluff ads (honey pots), heuristic-based and machine-learning algorithms detecting fake traffic and website and botnet monitoring software.
The FBI estimates that the total cost of insurance fraud stands at $40 billion per year (excluding healthcare insurance fraud) and that the average American family loses between $400- $700 per year. Insurance fraud is committed by the following groups of individuals: organized criminals who steal large sums of money through consistent fraudulent activities, professionals who overcharge for services and ordinary people who want to make a bit of extra cash.
Below are some of the common forms of insurance fraud followed by an example which has previously been uncovered:
- Auto insurance fraud
- The ringleader of an organized gang that staged motor crashes to con nearly £1.2 million from insurers was jailed for six years. Other gang members also received jail sentences totaling nearly 33 years.
- Healthcare fraud
- A woman who staged a fall over a crate in a supermarket in West Yorkshire to claim compensation, received a 21-month suspended jail sentence.
- Workers compensation fraud
- A retired fridge engineer dropped his claim for hearing loss caused by his work, when it emerged that he was a frontman in a rock ’n’ roll band. His claim documents denied that he had any noisy hobbies.
- Property fraud
- A criminal gang falsely claimed nearly £1 million for damage and lost earnings from restaurants they said had been flooded by burst water pipes. It turned out that they had deliberately smashed the water pipes and that the restaurants had never been open for business. The five men were jailed for a total of 14 years.
- Travel insurance fraud
- A man made multiple claims to different travel insurers claiming that illness meant he had to cancel his family holiday. He used fake airline tickets, bank statements and emails of hotel reservations to claim nearly £20,000. He received a 16-month jail sentence.
All of these examples involve fake claims in order to financially gain.
Insurance companies are limited in what they can do when they suspect fraud. Their options consist of informing law enforcement agencies of their suspicions, withholding payment to the claimant and collecting evidence against the potential fraudsters which can later be used in court. The effectiveness of the insurer’s anti-fraud measures come down to the level of priority assigned by law enforcement agencies and regulators, and the resources dedicated to the cause of collecting evidence by the insurance company itself.
In recent years, technology has developed to combat and detect insurance fraud. The most effective method is data technologies that reduce the time needed to identify the fraud. Fraudsters persistently update their methods and always find new ways to dishonestly gain financially, therefore advances in analytical technology constitute a vital development which allows to keep up with the new scams that are constantly being developed.
More traditional tools used to prevent such activities include examining the relationships between people, places and events using automated red flags and business rules. Conversely, updated methods use artificial intelligence to uncover fraud before a payment is made. This is done by flagging suspicious claims for further analysis.
About-Fraud Can Help
As you can see, there are many factors to think about in regards to ad and insurance fraud. Technology and strategies are constantly changing in order to keep up with fraudsters’ ever-evolving scams. At About-Fraud we can offer fraud fighters a global community that connects users with the latest trends, technology, and resources. We are currently building out the solution providers that focus specifically on insurance and ad fraud, so please get in touch if you have any recommendations!