Insurance Technology, also known as Insurtech, is the use of technology innovations designed to find cost savings and efficiency from the current insurance industry model. In South Africa, the insurance industry is witnessing a surge in Insurtech as many insurance companies are adopting technology to innovate and streamline services.
Insurtech companies are also becoming widely used in South Africa because they offer greater convenience, faster processing, and potentially more competitive products than traditional insurance companies, making insurance more accessible and attractive to a wider audience.
Unfortunately, with this digital transformation comes a looming threat which is cyber fraud. Criminals have beamed their satellite on the system, choosing to play a fast one on it and cart away unsuspecting customer and company valuables. This is why insurtech companies need to know and utilize the various tools to protect insurance technology companies.
With this in mind, South Africa recogniszes that for their insurance technology companies to thrive, robust cybersecurity measures are no longer optional but crucial. In this article, we shall be checking out tools to protect insurance technology companies in South Africa from cyber fraud.
The Cyber Fraud Landscape for Insurtech in South Africa
Statistics from the Southern African Fraud Prevention Service (SAFPS), show that a 600% increase in incidents of fraud was reported by their members in 2022 as compared to the numbers in 2018. So, it is safe to say that South Africa is riddled with cybercrime.
Insurtech companies handle sensitive customer data like financial information and claim history and these criminals use cybersecurity breaches or malicious software to exploit these digital systems; which could lead to significant financial losses, reputational damage, and even regulatory penalties for these companies.
What are the Common Cyber Frauds Targeting Insurtech Companies In South Africa?
As good as the new trend of insurance technology sounds in South Africa, these companies face a variety of cyber threats, the most concerning ones including:
1.Data Breaches
This is a major concern for South African Insurtech platforms as they collect and store sensitive customer data like financial information, medical records, and personal details. Hackers could have a field day if they target and breach these platforms to steal this data and use it for identity theft, selling it on the dark web, or launching further attacks against unsuspecting victims.
2. Fraudulent Claims
Another part is that of cybercriminals exploiting weaknesses in these digital insurance platforms to submit fake or inflated insurance claims. This could involve manipulating data, forging documents, or even creating fake identities. And with the era of deepfakes permeating the criminal sphere, almost anything is possible.
3. Account Takeover (ATO)
When working on Account Takeover, criminals can use loopholes in the system to steal login credentials including usernames and passwords of customers through phishing attacks or malware. As soon as they gain access to customer accounts, they can initiate fraudulent transactions, change policy details, or even submit fake insurance claims.
4. Insider Threats
Insurance companies are also at risk from within as even their employees can pose a risk. Disgruntled staff or those with weak cybersecurity awareness could accidentally or intentionally leak sensitive data or even collude with external attackers.
5. Denial-of-Service (DoS) Attacks
Attacks like these aim to overwhelm a company's servers with traffic, making it inaccessible to legitimate users. This could disrupt critical operations and prevent customers from accessing their accounts or filing claims.
Read Also: The Role of Technology in Detecting Insurance in Fraud
What Are The Consequences of Cyber Frauds Targeting Insurtech Companies In South Africa?
If criminals get to exploit these systems, their actions can have devastating effects on these companies. These consequences will most likely include:
1. Financial Losses
Insurtech companies are more likely to suffer significant financial losses if they are the target of data breaches, fraudulent claims, and other cybercrimes; as they may have to cover fraudulent claims, pay fines for data breaches, and invest heavily in remediation efforts.
2. Reputational Damage
A well-targeted cyber attack can severely damage an Insurtech company's reputation making customers lose trust in the company's ability to safeguard their data. This ultimately leads to the loss of business and potential lawsuits from customers.
3. Regulatory Scrutiny
Data breaches and other cyber incidents can attract unwanted attention from regulatory bodies including the Financial Services Conduct Authority (FSCA), and the South African Police Service (SAPS) and Insurtech companies may face hefty fines and stricter regulations if they are found to be non-compliant with data privacy and security laws.
4. Operational Disruption
Cyberattacks have the potential to interfere with vital business processes, making it harder for organisations to handle claims, publish rules, or even interact with clients. Customers who are irritated by this may become less productive.
5. Erosion of Customer Trust
Potentially the most detrimental outcome is the deterioration of client confidence. Customers may feel exposed and reluctant to divulge personal information when sensitive data is compromised, which might impede the expansion of the firm in the future. They might even end up losing the customer.
What are the Tools for Protecting Insurance Technology Companies in South Africa from Cyber Fraud?
To ensure a secure future, these tools can be used to protect insurance technology companies in South Africa from cyber fraud
1. Data Security
The first tool to protect insurance technology companies in South Africa from cyber fraud is data security. South African insurtechs need to ensure sensitive customer data, like financial information and medical records, needs to be shielded with robust encryption. This makes it unreadable even if intercepted by attackers.
Also, access to these records and accounts should be controlled by implementing multi-factor authentication (MFA) to add an extra layer of security during logins. Additionally, they can enforce role-based access control, granting users only the permissions necessary for their specific tasks.
Data Loss Prevention (DLP) solutions can also help monitor and prevent sensitive data from being accidentally or maliciously leaked through emails, downloads, or unauthorised transfers.
Furthermore, disaster recovery plans must be put in place to regularly back up data as part of a comprehensive disaster recovery plan. This ensures a swift and efficient response in case of a cyberattack or system failure.
2. Network Security
Network security is another tool used to protect Insurance technology companies in South Africa from cyber fraud. Firewalls and Intrusion Detection/Prevention Systems (IDS/IPS) should be the first line of defence, filtering incoming and outgoing traffic to identify and block suspicious activity. Firewalls act as a barrier, while IDS/IPS actively monitor for malicious attempts to infiltrate the network.
Patchwork perfection also comes to patch up software vulnerabilities regularly scanning the company’s systems for vulnerabilities, promptly installing security patches to close these gaps.
Network segmentation helps insurtech companies not put all their eggs in one basket. This isolates critical systems, minimising the potential damage if one area is breached.
Secure coding practices also comes in handy as if they are implemented during software development they will go a long way to minimize vulnerabilities that could be exploited by attackers.
3. Fraud Detection and Prevention
Another tool that can be used to protect insurance technology companies in South Africa from cyber fraud is the fraud detection and prevention tool. It helps to spot imposters first by implementing Anomaly Detection systems which continuously analyse user behavior and identify patterns that deviate from the norm. A sudden surge in login attempts or unusual activity on a customer account could be a red flag for potential fraud.
Machine Learning also comes in handy for fraud scoring. With artificial intelligence, machine learning algorithms can analyse vast amounts of data to identify patterns associated with fraudulent claims, helping to flag suspicious activity before it's too late.
They also need to use enhanced Customer Identity Verification systems to ensure South African insuretech companies know who they are dealing with; especially when dealing with high-value transactions or claims.
Insurtech company employees also need regular optimal Cybersecurity Awareness Training on cybersecurity best practices, including identifying phishing attempts, password hygiene, and reporting suspicious activity.
South African Regulatory Landscape and Compliance
South Africa takes data privacy and cybersecurity seriously and as such has two key regulations Insurtech companies must comply with:
First is the Protection of Personal Information Act (POPIA) which regulates how personal information is collected, used, stored, and disclosed. It grants individuals right to access, rectify, and erase their data. For Insurtech companies that handle a wealth of customer data, compliance with POPIA is essential.
The South African Cybercrimes Act also comes into play criminalising a range of cybercrimes, including unauthorised access to computer systems, data breaches, and cyber fraud. The act also outlines investigation and prosecution procedures for cybercrimes. By adhering to the Cybercrimes Act, Insurtech companies not only protect themselves but also contribute to creating a safer digital environment for everyone.
Why Is Compliance A Big Deal For Insurtech Companies?
Compliance with these regulations is not just about avoiding hefty fines. It's crucial for Insurtech companies for the following reasons:
- It builds trust with customers, who are increasingly concerned about their data security.
- It reduces and manages risk which can be financially damaging and reputationally devastating.
- It reduces regulatory scrutiny as non-compliance can attract unwanted attention from regulators, leading to investigations, penalties, and potential restrictions on operations.
- It gives the Insurtech company competitive advantage in the competitive market as a player with a strong commitment to data security, attracting customers who value their privacy.
Read: 6 Ways to Protect Your Business from Hackers this December
Conclusion
Now that you have checked out the various tools to protect insurance technology companies in South Africa from cyber fraud, we can see that they face challenges in their digital expansion. Cybersecurity is vital, requiring a multi-layered defence approach. This involves data security, network protection, and fraud detection strategies.
Yet, cybersecurity is ongoing, requiring constant updates and employee training. The future of South African Insurtech relies on creating a secure digital space. Prioritising cybersecurity builds trust, ensures compliance, and secures the future of digital insurance. Vigilance is key in the fight against cybercrime.
To be well protected against cyber fraud in your Insuretech company, you can trust no one but Youverify to help you integrate your system with these tools and more. All you need to do is book a demo with us today and watch us turn your fears into confidence. You can also check out our blog for the best information and updates in the Fintech and regulatory compliance world.