Fraud loss insurance aids banks in mitigating identity fraud

Fraud loss insurance is becoming more important for banks and financial institutions. In 2023, fraud cost these organizations $23 billion, which is a 13% increase from the previous year. Most of these losses come from new account fraud and account takeover fraud. As digital banking grows, so does the risk of fraud. Banks have strategies to prevent these losses, but fraud methods are always changing. Many banks struggle with high costs and customer dissatisfaction when handling fraud. Traditionally, banks would manage fraud risk by limiting the number of new customers they accept, which can lower fraud losses. However, this also means rejecting many potential customers, which can hurt profits. Stricter acceptance criteria increase the burden on customers, often requiring them to provide additional information even if they already have accounts. Now, a new solution called fraud loss insurance is gaining traction. This insurance allows banks to transfer some of the financial risk of fraud away from their own books. With advancements in artificial intelligence, insurers can better assess the risk associated with a business and offer tailored coverage. The process to obtain fraud loss insurance is straightforward. Institutions can assess their fraud risk needs and get a preliminary quote. Once approved, they receive an insurance policy that can help mitigate losses quickly. As fraud remains a significant challenge, banks are increasingly looking for advanced technology solutions. Combining fraud loss insurance with improved detection methods and analytics will help financial institutions better protect themselves and their customers. This layered approach is expected to enhance their ability to manage risk and improve overall financial health.