22 November 2022, 2:35 (CET)

INSURANCE: IMPROVED SECURITY BY A2A

How A2A payments can improve security for insurance providers


Security is the stock-in-trade of insurance firms. Without it, customers can’t feel confident that their interests are protected, and are unlikely to buy or renew plans. But in the information age, there’s more potential for compromised security, and lost customers, than ever before. Account-to-account payments offer a fast-growing solution to many insurance security challenges that firms face. But before explaining how A2A payments can help, it’s worth exploring why security is so crucial.


What to expect in this blog:

  • Security is crucial for Insurers
  • A2A payments: Reasons why this solution promises more security for Insurers
  • Traditional payments methods leave Insurers and their customers vulnerable – But why?
  • How to enhance safety with A2A payments right away

Security is crucial for Insurers

#1: Avoiding Fraud

Insurance fraud is a huge problem. In Europe, detected and undetected fraud is estimated to cost honest customers and insurers €13bn a year, and it’s a widespread problem. For example, in Finland, 27% of people say they know someone who has deceived their insurance company, up from 25% in 2010. Technologies such as online applications and some payment methods have made fraud easier, but they also present new means to stop fraud—both are reflected by the consistent growth of the global fraud detection market.1

#2: Protecting customers

As customer data has become an increasingly valuable commodity, the need to keep it secure has grown. Insurers need to process people’s data to operate, but if they handle it badly, the consequences are significant. The 2021 Global Consumer State of Mind Report found that 60% of users say they would spend more money with a brand they trust to handle their personal data responsibly, and 84% are more loyal to companies with strong security controls.2 From a customer retention perspective, firms can’t afford to mishandle client data, and that’s before considering the importance of regulatory compliance.

#3: Complying with regulation

The growing trade in data has necessitated a raft of legislation to help protect people’s information. Europe’s 2002 ePrivacy Directives—which legislators are currently looking to update—as well as GDPR have introduced significant sanctions for businesses that fail to comply. Companies that don’t protect customers’ data are liable for an eye watering maximum fine of €20m, or 4% of global turnover. 3

#4: Offering appropriate plans

As people’s lives and businesses have moved online, old methods of assessing viability for everything from loans to insurance have become increasingly redundant. In order to provide a secure, trustworthy product, financial service providers of all kinds need to be able to assess a wider range of data points in order to make good decisions. Failing to do so means lost revenue, and damaged reputations.

A2A payments can help Insurers improve security

McKinsey & Co’s 2019 Global Payments Report3 suggests that account-to-account payments are on the way to threatening cards as the leading choice for non-cash retail payments, and with good reason. There’s a growing appetite for cutting out the middleman while making payments, and when it comes to security for insurers and their customers, adopting A2A payments offers significant benefits in a several areas:

Fraud Avoidance:
PSD2, the European legislation that governs Open Banking—requires companies to use Strong Customer Authentication. That means consumers must use at least two forms of identification when making payments online, and has already seen a massive reduction in fraud since its initiation in 2019. Between December 2020 and April 2021, the volume of fraudulent transactions for issuers fell by around 50%, while the value lost from fraud dropped 33%.4

Regulatory Compliance:
As technology rapidly evolves and regulation struggles to keep up, any business not specialising in payments is likely to have difficulty maintaining compliance. Updating systems in-house can be costly and time-consuming, but by adopting a payments solution through a trust payment services provider, insurers can be certain that their systems are always in line with current legislation, eliminating the risk of breaking the law and incurring hefty fines.

Risk Management:
Offering appropriate plans and protecting customers is a question of risk management. Thanks to Open Banking — the protocol on which A2A payments rely — financial data is made readily available and secure. That means insurers have more data to work with, and can more accurately calculate risk. Not only that, but A2A payment solutions like those from SEPAexpress offer amount limits and powerful risk engines, allowing insurers to outsource a large portion of risk assessment to their PSP. Because the service provider has access to reliable data from a wide range of firms, they’re able to offer more accurate assessments.

Traditional payments methods leave Insurers and their customers vulnerable - But why?

There are multiple areas in which insurers can rise to meet the security challenges of the digital age, but one that’s often overlooked is payments.
As businesses rush to digitise their services — and insurers are no exception5— traditional payment methods like cards are consistently failing to meet the security challenges this digitisation presents. In the last decade, global losses from payment fraud have increased 300%6, and in the Single Euro Payments Area, ‘card not present’ scenarios account for 79% of card frauds.
Relying on traditional card payments, insurers open themselves up to fraud from dishonest customers, but also from third parties. One of the most significant cyberthreats to insurers in Europe is phishing mails7 targeted at customers to retrieve credit card information. With every case of fraud against an insurance firm — whether by malicious customers or third parties — they’re more likely to be designated high risk by card issuers and reputation damage and reduced customer retention. Fortunately, alternative payment methods like A2A present novel solutions against fraud, as well as the other security challenges insurers face.

How to enhance safety with A2A payments right away

Transitioning away from traditional card payments and towards greater security with A2A payments is a surprisingly painless process. Since 84% of Europeans already have a bank account, and 25 billion direct debit payments were processed last year, the infrastructure for mass A2A payments adoption is already in place. All insurers need is a trusted, reliable PSP that can offer them the security their customers demand.

SEPAexpress offers fully white-labeled, plug-and-play A2A payments solutions that can help insurance firms improve their security, assessment process, and reputation right away. Because we offer faster reconciliation and chargeback reports in as little as two banking days, our service can significantly reduce the risk of shipping fraud. And with the power of Open Banking, our account information service means only verified account holders can initiate transactions—leading to 80% fewer chargebacks. To take advantage of a best-in-class A2A payments solution, more data than any one company can gather alone, and none of the costs of building and maintaining a solution in-house, book a demo today.

1 insurance europe (2013): The impact of insurance fraud. [online]
https://www.insuranceeurope.eu/mediaitem/0bf0af82-e7ef-4439-a763-d7862859d421/The%20impact%20of%20insurance%20fraud.pdf [07.11.2022]

2 TRUATA: Global Consumer State of Mind Report 2021. [online]
https://www.truata.com/resources/report/global-consumer-state-of-mind-report-2021/ [07.11.2022]

3 EUR-Lex (2002, 12. July): Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the processing of personal data and the protection of privacy in the electronic communications sector (Directive on privacy and electronic communications). [online]
https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX%3A32002L0058 [07.11.2022]

4 it governance: GDPR Fines – Administrative fines and other penalties for non-compliance with the UK General Data Protection Regulation and Data Protection Act 2018, and EU General Data Protection Regulation. [online]
https://www.itgovernance.co.uk/dpa-and-gdpr-penalties#:~:text=The%20EU%20GDPR%20sets%20a,lead%20to%20data%20protection%20fines. [07.11.2022]

5 Hay, Laura J: The COVID-19 catalyst: Insurers race to digitize
Insurers have sped up their digitization agendas. Are they ready to compete in the new reality? [online]
https://home.kpmg/xx/en/home/insights/2020/11/the-covid-19-catalyst-insurers-race-to-digitize.html [07.11.2022]

6 MERCHANT SAVVY (2022, October):Global Payment Fraud Statistics, Trends & Forecasts. [online]
https://www.merchantsavvy.co.uk/payment-fraud-statistics/ [07.11.2022]

7 MERCHANT SAVVY (2022, October):Global Payment Fraud Statistics, Trends & Forecasts. [online]
https://www.merchantsavvy.co.uk/payment-fraud-statistics/ [07.11.2022]

8 McKinsey & Company: Global Payments Reports 2019: Amid sustained growth, accelerating challenges demand bold actions. [online]
https://www.mckinsey.com/~/media/mckinsey/industries/financial%20services/our%20insights/tracking%20the%20sources%20of%20robust%20payments%20growth%20mckinsey%20global%20payments%20map/global-payments-report-2019-amid-sustained-growth-vf.ashx [26.10.2022]

9 Air Plus INTERNATIONAL (2021, 26.August):The AirPlus Global.Insights from the corporate payment world – Strong Customer Authentication: How SCA has affected payments. [online]
https://comms.airplus.com/en/world/blog/sca-payment-impact#:~:text=The%20volume%20of%20fraudulent%20transactions,begin%20to%20become%20the%20norm. [10.2022]

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Sabrina Jaksche

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