Should In­sur­ers be re­spon­si­ble for Data Val­i­da­tion?

Business a.m. - - FRONT PAGE - EKERETE OLA GAM-IKOM, MNIM, CPP Con­sul­tant Man­age­ment~ Strat­egy~In­sur­ance M:+234-806-648-1111; +234-802-585-0344

THE STAN­DARD PRAC­TICE, NOT nec­es­sar­ily the best, when pro­vid­ing in­sur­ance cover whether in li­a­bil­ity, life, ca­su­alty or prop­erty in­sur­ance is to en­sure that the in­ter­est of the pol­i­cy­holder is very clear and dis­tin­guished from...

THE STAN­DARD PRAC­TICE, NOT nec­es­sar­ily the best, when pro­vid­ing in­sur­ance cover whether in li­a­bil­ity, life, ca­su­alty or prop­erty in­sur­ance is to en­sure that the in­ter­est of the pol­i­cy­holder is very clear and dis­tin­guished from any other in­ter­est in­clud­ing that of the party pay­ing the pre­mium. While an in­sur­ance com­pany is al­ways keen to close the deal, it would not be with­out clar­i­fy­ing who would be paid claims, if and when the sit­u­a­tion arises in fu­ture.

The ques­tion, there­fore, is: Should in­sur­ance com­pa­nies en­sure that the per­sons or or­ga­ni­za­tions they in­sure are gen­uine and valid en­ti­ties? In an era where it is com­mon to come across re­quests on web­sites for you to ver­ify that you are not a ro­bot, and some­times, ir­ri­tat­ing steps, there is vi­tal need to val­i­date data given the in­creas­ing cases of cy­ber­crime.

If how­ever, the prac­tice in in­sur­ance trans­ac­tions, which does not re­quire in­sur­ance com­pa­nies to val­i­date the in­for­ma­tion and data they re­ceive sub­sist, it would be very in­ter­est­ing to see how things play out in the emer­gent digital en­vi­ron­ment where con­nected in­for­ma­tion have be­come the source.

Data Re­quired For In­sur­ance Con­tracts

For ease of un­der­stand­ing this chal­lenge, let us ex­am­ine what hap­pens in­side the in­sur­ance sec­tor. So, for any in­sur­ance con­tract, the cus­tomer (pol­i­cy­holder) is legally meant to pro­vide per­sonal de­tails and spe­cific in­for­ma­tion about the as­sets to be in­sured, some­times it might be per­sons in em­ploy­ment, and hence the sched­ule of names would be made avail­able. In­sur­ance com­pa­nies, on the other hand, are re­quired by the Know Your Cus­tomer (KYC) regime to en­sure that they have all vi­tal in­for­ma­tion about their pol­i­cy­hold­ers but the ques­tion re­mains: Should such in­for­ma­tion be kept with­out val­i­da­tion? Will it be ap­pro­pri­ate to as­sume that the form of iden­ti­fi­ca­tion pro­vided by the cus­tomer is in or­der with­out any val­i­da­tion with the is­su­ing author­ity?

If it is chal­leng­ing with an in­di­vid­ual pol­i­cy­holder, it be­comes even more ar­du­ous with in­cept­ing poli­cies for groups of peo­ple. Group Life and Group Ac­ci­dent in­sur­ance poli­cies that have large num­bers of per­sons cov­ered usu­ally just have per­sonal de­tails of the listed per­sons as pro­vided by the named or­ga­ni­za­tion. In this case, in­sur­ance com­pa­nies nei­ther have any form of iden­ti­fi­ca­tion for the per­sons on the sched­ule nor seek to val­i­date. This is be­cause the in­sur­ers, on the ba­sis of the con­tract are li­able to the or­ga­ni­za­tion, also rec­og­nized as the in­sured and the one that will be paid the claim, where the sit­u­a­tion arises; though there could be, as part of the con­tract, an un­der­stand­ing that claims pay­ment be made in favour of the af­fected per­son, in case of ac­ci­dent or the ben­e­fi­ciary, in case of death.

Imag­ine for a mo­ment that th­ese claims pay­ments by in­sur­ance com­pa­nies could have been made to fic­ti­tious per­sons since there were not prop­erly iden­ti­fied and their iden­ti­ties not duly val­i­dated. Putting this in nu­meric con­text, will al­low bet­ter ap­pre­ci­a­tion of the ex­po­sure of the Share­hold­ers’ Funds of in­sur­ance com­pa­nies, for ex­am­ple:

ac­ci­dents be­fore mak­ing claims pay­ments, and some­times, dis­crep­an­cies are no­ticed in the data pro­vided by the cus­tomer (the or­ga­ni­za­tion), which causes avoid­able de­lays. Still, the ques­tion is: Should in­sur­ance com­pa­nies val­i­date the data they re­ceive from clients?

Any Ben­e­fits of Data Val­i­da­tion?

To my mind, there are some ben­e­fits that the in­sur­ance in­dus­try, the insuring or­ga­ni­za­tions, the per­sons listed on the poli­cies and the gen­eral pub­lic will en­joy if the in­for­ma­tion and data that are pro­vided for in­sur­ance pur­poses are val­i­dated.

For the in­sur­ance in­dus­try in Nige­ria, what says that they are not pay­ing claims that they should not pay? Claims costs are in­creas­ing sig­nif­i­cantly as we have seen dur­ing this COVID-19 pe­riod and there are no in­de­pen­dent ways, and even no time, to con­firm the ve­rac­ity of th­ese claims be­sides sim­ply be­liev­ing the or­ga­ni­za­tion. In­sur­ance frauds are also grow­ing steadily and the need to change the way in­sur­ance poli­cies are done can­not be over­stated. It will be nec­es­sary to have ma­chines or ac­cess codes of the is­su­ing au­thor­i­ties within in­sur­ance com­pa­nies to val­i­date the iden­ti­ties of pol­i­cy­hold­ers or per­sons listed as ben­e­fi­cia­ries in in­sur­ance con­tracts.

The or­ga­ni­za­tions in­sured will also need to pro­tect their rep­u­ta­tion and the in­tegrity of the in­for­ma­tion and data they pro­vide to in­sur­ance com­pa­nies for their con­tracts. We have seen some cases of con­nivance be­tween ex­ec­u­tives of in­sur­ance com­pa­nies and the or­ga­ni­za­tions they in­sure and val­i­dat­ing in­for­ma­tion and data could dis­cour­age such acts.

Men­tion must also be made of the height­ened con­fi­dence the insuring pub­lic will have in in­sur­ance when they know that their in­for­ma­tion and data are val­i­dated with the is­su­ing au­thor­i­ties, Re­call that in­sur­ance con­tracts prob­a­bly have the most de­tailed in­for­ma­tion and data on per­sons and prop­er­ties, so it might be the dif­fer­en­tia­tor we need for our iden­tity man­age­ment in Nige­ria.

The in­sur­ance in­dus­try in Nige­ria is poised to en­gage mas­sive op­por­tu­ni­ties as we ap­proach the ‘new nor­mal’ but needs to be cir­cum­spect as cy­ber­crime in­creases along with the in­creased adop­tion of in­sur­ance through on­line and mo­bile plat­forms.

Today’s cus­tomers are very con­cerned about the use of their in­for­ma­tion and data, so in­sur­ers should be broad­cast­ing their pri­vacy poli­cies to their pol­i­cy­hold­ers, whether in­di­vid­u­als or or­ga­ni­za­tions.

It does make sense to val­i­date your data as you in­sure your­self, your em­ploy­ees or as­sets!

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