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Forget deepfakes, shallowfakes are the real threat to the insurance industry

Source: Finance Derivative

By Martin Rehak, CEO & Founder at Resistant AI

To believe or not to believe—the dilemma facing insurers dealing with increased digital document fraud

Fraud continues to be a serious threat to the insurance industry, rising by 73% in 2021 according to Kingsley Napley. In the face of the unprecedented challenges of the pandemic, insurers have continued to try to thwart insurance fraudsters in order to protect honest customers.

Contributing to this fraudulent scenario are so-called “deepfakes”—sophisticated forgeries of still or video images or audio recordings made with the aid of artificial intelligence (AI) technology. But while these have become increasingly prevalent in fraudulent insurance claims, the insurance industry is now seeing more of what are called “shallowfakes”.

Once limited to a social media novelty, deepfake and shallowfake fraud has emerged as a formidable threat to the insurance industry, which already suffers from over US$80 billion in annual fraud in the US alone.

The difference between deepfakes and shallowfakes is that while deepfakes require AI to create them, shallowfakes can be created using basic photo editing software, such as Photoshop. The term “shallow” might imply that they are less threatening than their deepfake counterparts. But the fact that they do not require deep AI/machine learning methods to create them means that shallowfakes can be made and deployed easier and faster—for that reason, shallowfakes are presenting a more immediate fraud risk to insurers.

Insurance fraud can range from a person providing false information to an insurance company in order to get cover on more favourable terms, or faking motor vehicle, commercial, household or other personal insurance claims.

In these and other fraud scenarios, shallowfakes can include:

  • False proof of identity or address – including photo ID documents such as driving licences, passports, national insurance cards, utility bills and bank statements
  • Fake supporting evidence – any evidence required to support a claim or transaction, such as invoices for services, contracts and agreements, no claims discount certificates, or expert reports

Of course, the problem of altered digital media is not entirely new to the insurance industry. Photo editors began to proliferate many years ago and, in fact, altered photos that falsely inflate claims have been a leading concern among insurers in tackling fraud.

What is new is the scale of the problem: it’s not uncommon to find the same document being reused tens or even hundreds of times with just name, account, and address altered, effectively creating as many fake identities from a single template. This was the case of a single Canadian passport which was reused and submitted over 2,500 times in the space of 20 days — with one day clocking in over 400 submissions, each with subtle changes in name, address, and even hairstyle on the portrait to avoid detection.

Self-service automation

While there have been some moves to reduce shallowfake fraud, the pace of touchless automation—in the form of self-service transactions and straight-through processing (STP)—has been fast and furious. Undoubtedly, the global pandemic has aided the transition to self-service since it was a natural fit for claims reporting during lockdowns.

At the same time, this has increased dependency on customer-supplied photos for settling claims—an excellent opportunity for shallowfakes as the risk of fraud from altered, manipulated or synthetic photos significantly increases.

The past couple of years have shown that touchless claims (and underwriting) transactions are here to stay, and the way digital media can be compromised has become more elaborate. As a result, proactively taking steps to implement automated fraud prevention technology to tackle shallowfakes is quickly becoming an important consideration for protecting insurers’ business.

Using AI to detect shallowfakes

While shallowfakes don’t require AI to create them, AI can significantly increase the chances of detecting them. The use of AI solutions—combined with human instinct, attention to detail, and awareness and knowledge to check the validity of what is being processed—can prove a win-win for detecting fraudulent documentation.

Having AI-powered detection built into a claims process is one way of stopping fraud and increasing accurate claim handling. Without any ability to check, for example, the authenticity of photos, damages might be exaggerated, and insurers will ultimately pay for losses that are either entirely false or inflated.

The pace of claims automation is far exceeding the pace of automated fraud prevention, which is opening new risks as well as new opportunities. Some insurance companies may be willing to risk fraud vulnerabilities in return for cost savings elsewhere and an improved customer experience. That is a fine balance that they need to strike.

In the light of increased shallowfake activity, it has become increasingly necessary for the insurance companies to pay closer attention to the documentation being submitted for claims, where fraudsters may use shallowfakes to claim for large sums of money they are not entitled to.

Document scrutiny can be significantly enhanced with AI-based “document forensics” to find fraud that the human eye can’t see in insurance claims, and verify the authenticity of digital documents.

Matt Gilham, Head of Enterprise Fraud, Esure, recently quoted: “Insurance organisations are accelerating their adoption of digital technologies to better service customers and claims.  As digitalisation and speed of processing increases, vulnerabilities are created that, if left unchecked, can be exploited by tech savvy fraudsters. The problem with shallowfakes stems from the ease with which digital documents and images can be manipulated using readily available tools. The subtlety of shallowfake alterations makes them increasingly difficult, and often impossible, to track visually. As the manipulation of digital documents becomes more prominent, AI automation technology is a vital aid in the identification of, and defence against, shallowfakes.  This enables faster and more efficient insurance processing, while also stepping up defences against fraudulent abuse.”

A direct threat

By their very nature, shallowfakes are a direct threat to the accuracy of information relating to any individual in the existing digital environment. However, the threat that they pose will only increase as our interactions with the metaverse increase, given that there will be more opportunities for their use.

The cost of inaction to the insurance industry may be high. In all likelihood, few if any insurance firms have yet addressed the growing threat posed by shallowfakes. Yet it should be a high priority for them—without immediate action being taken to mitigate the impact of shallowfakes, they could be a threat that is hard to stop.

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Business

How relationships with work are changing

by Amrit Sandhar (CEO/ Founder, &Evolve)

Since Chris Argyris’s work in the 1960s into the psychological work contract, the assumption’s remained that it’s based on mutual exchange of beliefs and expectations of what employee and employer can expect from each other, given a contract only works with two parties agreeing to it.

But have we seen a shift in the balance of this contract, where the expectations of employees have really changed? Since the industrial revolution, organisations dictated employees’ working arrangements which focused on driving greater productivity and performance. This reflected the imbalance of power, with employees reliant on their organisations to structure working arrangements to drive the best results.

Employees signed up to this psychological contract, despite it representing an imbalance in favour of the employer. However, the pandemic stressed this equilibrium, which has led to many, reevaluating their relationship with their work.

While the pandemic has had a long-term impact on most, affecting everything from education to mental health, it could also be the cause of an evolution that’s changing people’s relationship with work. While organisations were supported through furlough schemes and government grants, employees took responsibility for keeping businesses going, by changing the way they worked. Employees took an unprecedented situation and found ways of dealing with it and since the first time in many years, employees had and took direct ownership of the success of the organisations they worked for – which changed everything.

We’ve seen a seismic shift in how we think about work since the that time, which goes far beyond submitting requests for flexible working. It shows that we’re at the threshold of realising a more balanced psychological work contract, driven by employees, who have different mutually agreed beliefs and expectations in how employees and employers work together.

Gone are the days when employees are only satisfied with financial reward and a nice manager. Gen Z will soon become the largest generation making up our workforce and while money is important to them (as they’re likely to be poorer than previous generations), many want work to be something that complements their life, and not something that only provides financial reward.

Some have said the generation gap is a myth, and before the pandemic this may have been true. But when a generation has experienced such a paradigm shift it brings a different mindset of beliefs and expectations about how work can and should be carried out.

It’s hard to see how anyone could go back to the previous way of working, which should have always focussed on outputs and outcomes rather than hours worked. Other than manufacturing, where it was easy to measure productivity, organisations have become complacent in measuring output and outcomes, with employees paying the price for this ambiguity.

Organisations utilising employee engagement surveys, listening forums, and employee representative initiatives often launch them with the best of intentions, however, the historical underlying imbalance of power towards employers, has prevented a more equitable relationship from forming, despite these initiatives. The strain some organisations are experiencing with mounting pressure to challenge how work is carried out, whether from expecting remote working to questioning if a four-day week would drive greater productivity, shows the shift taking place to the long-standing equilibrium of the psychological work contract.

Future successful organisations will be those that can attract and retain the best talent, and it’s unlikely that the next generation of employees will be willing to relinquish their courage to challenge how work is done.

Employees will seek a greater understanding of exactly what’s required of their role and expect organisations to clearly define measures, to understand how their value and success will be measured, regardless of when, where, and how they choose to work.

Rather than resisting change organisations should consider how they can shape it, by questioning and finding solutions to measuring outputs and productivity, by looking at how they help employees feel respected and valued, and how they help bring the psychological contract, based on a new set of mutually agreed expectations and beliefs to life.

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Business

How 5G is enhancing communication in critical sectors

Luke Wilkinson, MD, Mobile Tornado

In critical sectors where high-stakes situations are common, effective communication is non-negotiable. Whether it’s first responders dealing with a crisis or a construction team coordinating a complex project, the ability to share information quickly and reliably can mean the difference between success and failure.

Long-distance communication became feasible in the 1950s when wireless network connectivity was first utilised in mobile radio-telephone systems, often using push-to-talk (PTT) technology. As private companies invested in cellular infrastructure, the networks developed and data speeds improved increasingly. Each major leap forward in mobile network capabilities was classed as a different generation and thus 1G, 2G, 3G, 4G, and now 5G were born.

5G is the fifth generation of wireless technology and has been gradually rolled out since 2019 when the first commercial 5G network was launched. Since then, the deployment of 5G infrastructure has been steadily increasing, with more and more countries and regions around the world adopting this cutting-edge technology.

Its rollout has been particularly significant for critical sectors that rely heavily on push-to-talk over cellular (PTToC) solutions. With 5G, PTToC communications can be carried out with higher bandwidth and speed, resulting in clearer and more seamless conversations, helping to mitigate risks in difficult scenarios within critical sectors.

How is 5G benefiting businesses?

According to Statista, by 2030, half of all connections worldwide are predicted to use 5G technology, increasing from one-tenth in 2022. This showcases the rapid pace at which 5G is becoming the standard in global communication infrastructure.

But what does this mean for businesses? Two of the key improvements under 5G are improved bandwidth and download speeds, facilitating faster and more reliable communication within teams. PTToC solutions can harness the capabilities of 5G and bring the benefits to critical sectors that need it most, whether that’s in public safety, security, or logistics: the use cases are infinite. For example, this could be leveraging 5G’s increased bandwidth to enable larger group calls and screen sharing for effective communication.

Communication between workers in critical industries can be difficult, as often the workforces are made up of lone workers or small groups of individuals in remote locations. PTToC is indispensable in these scenarios for producing quick and secure communication, as well as additional features including real-time location information and the ability to send SOS alerts. PTToC with 5G works effectively in critical sectors, as 5G is designed to be compatible with various network conditions, including 2G and 3G. This ensures that communication remains reliable and efficient even in countries or areas where 5G infrastructure is not fully deployed to keep remote, lone workers safe and secure.

The impact of 5G on critical communications

The International Telecommunication Union has reported that 95 percent of the world’s population can access a mobile broadband network. This opens up a world of new possibilities for PTToC, particularly when harnessing new capabilities for 5G as it’s being rolled out.

One of the most significant improvements brought by 5G is within video communications, which most PTToC solutions now offer. Faster speeds, higher bandwidth, and lower latency enhance the stability and quality of video calls, which are crucial in critical sectors. After all, in industries like public safety, construction, and logistics, the importance of visual information for effective decision-making and situational awareness cannot be overstated. 5G enables the real-time transmission of high-quality video, allowing for effective coordination and response strategies, ultimately improving operational outcomes and safety measures.

Challenges in Adopting 5G in Critical Sectors

While the benefits of 5G are undeniable, the industry faces some challenges in its widespread adoption. Network coverage and interoperability are two key concerns that need to be addressed to ensure communication can keep improving in critical sectors.

According to the International Telecommunication Union, older-generation networks are being phased out in many countries to allow for collaborative 5G standards development across industries. Yet, particularly in lower-income countries in Sub-Saharan Africa, Latin America, and Asia-Pacific, there is a need for infrastructure upgrades and investment to support 5G connectivity. The potential barriers to adoption, including device accessibility, the expense of deploying the new networks, and regulatory issues, must be carefully navigated to help countries make the most out of 5G capabilities within critical sectors and beyond.

However, the rollout of 5G does cause data security concerns for mission-critical communications and operations, as mobile networks present an expanded attack surface. Nonetheless, IT professionals, including PTToC developers, have the means to safeguard remote and lone workers and shield corporate and employee data. Encryption, authentication, remote access, and offline functionality are vital attributes that tackle emerging data threats both on devices and during transmission. Deploying this multi-tiered strategy alongside regular updates substantially diminishes the vulnerabilities associated with exploiting 5G mobile networks and devices within critical sectors.

While the challenges faced by the industry must be addressed, the potential benefits of 5G in enhancing communication and collaboration are undeniable. As the rollout of 5G continues to gain momentum, the benefits of this cutting-edge technology in enhancing communication in critical sectors are becoming increasingly evident. The faster, more reliable, and efficient communication enabled by 5G is crucial for industries that rely on real-time information exchange and decision-making.

Looking ahead, the potential for further advancements and increased adoption of 5G in critical sectors is truly exciting. As the industry continues to address the challenges faced, such as network coverage, interoperability, and data security concerns, we can expect to see even greater integration of this technology across a wide range of mission-critical applications for critical sectors.

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Could electric vehicles be the answer to energy flexibility?

Rolf Bienert, Managing and Technical Director, OpenADR Alliance

Last year, what was the Department for Business, Energy & Industrial Strategy and Ofgem published its Electric Vehicle Smart Charging Action plans to unlock the power of electric vehicle (EV) charging. Owners would have the opportunity to charge their vehicles while powering their homes with excess electricity stored in their car.

Known as vehicle to grid (V2G) or vehicle to everything (V2X), it is the communication between a vehicle and another entity. This could be the transfer of electricity stored in an EV to the home, the grid, or to other destinations. V2X requires bi-directional energy flow from the charger to the vehicle and bi- or unidirectional flow from the charger to the destination, depending on how it is being used.

While there are V2X pilots already out there, it’s considered an emerging technology. The Government is backing it with its V2X Innovation Programme with the aim of addressing barriers to enabling energy flexibility from EV charging. Phase 1 will support development of V2X bi-directional charging prototype hardware, software or business models, while phase 2 will support small scale V2X demonstrations.

The programme is part of the Flexibility Innovation Programme which looks to enable large-scale widespread electricity system flexibility through smart, flexible, secure, and accessible technologies – and will fund innovation across a range of key smart energy applications.

As part of the initiative, the Government will also fund Demand Side Response (DSR) projects activated through both the Innovation Programme and its Interoperable Demand Side Response Programme (IDSR) designed to support innovation and design of IDSR systems. DSR and energy flexibility is becoming increasingly important as demand for energy grows.

The EV potential

EVs offer a potential energy resource, especially at peak times when the electricity grid is under pressure. Designed to power cars weighing two tonnes or more, EV batteries are large, especially when compared to other potential energy resources.

While a typical solar system for the home is around 10kWh, electric car batteries range from 30kWh or more. A Jaguar i-Pace is 85kWh while the Tesla model S has a 100kWh battery, which offers a much larger resource. This means that a fully powered EV could support an average home for several days.

But to make this a reality the technology needs to be in place first to ensure there is a stable, reliable and secure supply of power. Most EV charging systems are already connected via apps and control platforms with pre-set systems, so easy to access and easy to use. But, owners will need to factor in possible additional hardware costs, including invertors for charging and discharging the power.

The vehicle owner must also have control over what they want to do. For example, how much of the charge from the car battery they want to make available to the grid and how much they want to leave in the vehicle.

The concept of bi-directional charging means that vehicles need to be designed with bi-directional power flow in mind and Electric Vehicle Supply Equipment will have to be upgraded as Electric Vehicle Power Exchange Equipment (EVPE).

Critical success factors

Open standards will be also critical to the success of this opportunity, and to ensure the charging infrastructure for V2X and V2G use cases is fit for purpose.

There are also lifecycle implications for the battery that need to be addressed as bi-directional charging can lead to degradation and shortening of battery life. Typically EVs are sold with an eight-year battery life, but this depends on the model, so drivers might be reluctant to add extra wear and tear, or pay for new batteries before time.

There is also the question of power quality. With more and more high-powered invertors pushing power into the grid, it could lead to questions about power quality that is not up to standard, and that may require periodic grid code adjustments.

But before this becomes reality, it has to be something that EV owners want. The industry is looking to educate users about the benefits and opportunities of V2X, but is it enough? We need a unified message, from automotive companies and OEMs, to government, and a concerted effort to promote new smart energy initiatives.

While plans are not yet agreed with regards to a ban on the sale on new petrol and diesel vehicles, figures from the IEA show that by 2035, one in four vehicles on the road will be electric. So, it’s time to raise awareness the opportunities of these programs.

With trials already happening in the UK, US, and other markets, I’m optimistic that it could become a disruptor market for this technology.

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