Facial Recognition in the Insurance Industry

The insurance industry forms an integral component of the global economy because of the amount of the premium it collects, the scale at which it invests and the role it plays by helping people and businesses protect themselves from unforeseen situation. The industry is a fast growing industry. As per a press release by Munich RE, the international primary insurance sector will grow by 4.5% p.a. on average (3.0% in real terms, i.e. adjusted for inflation) in 2017 and 2018.

Just like every industry, insurance industry also faces its own challenges. Challenges at the global level are similar to the challenges at the country level. As an example, two of the biggest challenges that the insurance industry of India is currently facing include:

Fraudulent claims

It has been commonly observed that many people tend to file fraudulent claims. For instance, people filing health insurance claims multiple times and across multiple insurance companies. Similar is the scenario for motor insurance – frauds are increasing at an alarming rate. As per a report by economic times, “a combination of poor due diligence in writing policies by insurance companies and the organisational efficiencies of criminals in identifying those who are on deathbed and in enlisting doctors to produce fake certificates led to frauds which are estimated to have cost over Rs 10,000 crore annually to the industry.” These frauds directly affect the profitability of the industry. In order to make up for the fraudulent claims, companies tend to raise premiums, meaning innocent customers have to pay higher amounts of premiums.

Mis-selling

The primary channel through which insurance is sold in India is the agent channel. In order to increase the sales, agents tend to sell wrong products to the customers. Often, agents do not provide complete information to the customers. As a result, customers don’t get the best product and this leads to a poor customer experience which is a loss for the industry. Another common issue that arises often is that since people are not much educated, they often aren’t able to provide their complete details. However, for the sake of form-filling, agents fill wrong details.

How to deal with these challenges

In order to face these issues, the government of India has issued guidelines for the industry. Indian insurance industry is regulated by a regulatory body called Insurance Regulatory and Development Authority of India, popularly known as IRDAI. Keeping the frauds and mis-selling issues in mind, IRDAI has mandated that each customer should provide his/her KYC (know your customer) details. The idea is to capture as much information about the customer as possible. KYC is generally linked to some form of government-issued identity proof, popularly known as Aadhaar Card, which is the equivalent of a social security card. For the agent channel, the KYC procedure is done manually by the agent where the agent collects a copy of the Aadhaar Card (or any other government issued ID) of the customer and submits it to the insurer.

Lately, the online sales channel for insurance has been on the rise. Top insurance companies of India predict that by 2020, more than a third of their sales will be through online channels. Almost all companies have therefore prepared their technical stack for catering to increased online sales. Many aggregators have also emerged that help people compare offerings of various insurers so that they can purchase the best one.

With the emerging concept of online insurance selling, there emerged an issue of e-KYC – performing customer’s KYC online. Currently, it is done manually where there is a KYC team that manually checks the KYC documents uploaded by the customer while purchasing the policy online. However, this process is cumbersome, as it requires a lot of human effort. With the increasing growth of the online sales channels, it is going to become even more challenging to perform KYC tasks manually. As a result, many insurance companies are searching for technologies that can help them perform e-KYC – an automated KYC procedure.

Face recognition

One such e-KYC solution uses face recognition technology. In this solution, the customer uploads a copy of his/her government issued identity proof and at the same time, uploads a short video of himself/herself performing a specific task assigned by the system. The tasks may be very simple and including things like – moving face in a specific manner, rolling the tongue out, etc. The system then checks 2 things:

  • Liveliness: is the customer alive? Is he/she performing the same task that was issued by the system? This will help the system detect that the video is fresh because the tasks as randomly assigned.
  • Identity verification: the system uses face recognition to match the video in the face to the face present on the photo identity proof document.

By performing these 2 tasks, the system is able to complete the entire KYC procedure online and automatically. This whole suite is popularly known as e-KYC – electronic KYC. e-KYC has been growing fast and many companies are adopting it simply because it saves a lot of human effort and at the same time, allows for an instant KYC procedure.

This is one interesting use case of how insurance industry globally is innovating to provide better customer service to its customers.

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