our wired world

Today’s Big Cons

Will Phone and Cyber Scams Spell the Death of Direct Marketing?

by Mark Breading

Mr. Breading is a partner with Strategy Meets Action (SMA), a leading strategic advisory services firm exclusively serving the insurance industry. Reprinted with permission. Visit here.

February 24, 2017 — We are facing an epidemic that is only going to get worse – the scourge of cyber and telephone based scams against individuals and businesses.

Scammers are becoming so sophisticated that it is difficult for even the most educated and tech savvy individuals to avoid being conned. It is actually difficult to find someone who has not fallen for some kind of scheme that resulted in stolen money or a stolen identity.

These highly sophisticated and organized criminals are now able to assemble substantial information about an individual, their relationships with others, the products they own, and the businesses they interact with. This allows scammers to create credible, convincing stories and interactions that instill confidence or fear, causing people to give out sensitive personal information, credit card information, or other financial details.

Some of these schemes are so involved that they span days or weeks and result in individuals wiring significant amounts of money to these villains. Other plots are based on ransomware that extorts money in exchange for the release of locked up digital information.

Shutting Down

The result of this barrage of attacks – especially against individuals – is that many people are just shutting down. You’ve probably seen the advice in recent articles that you should hang up immediately when the caller is not recognized, because criminals are now enticing the person to say “yes,” recording their voice, then using that recording as consent to conduct illegal financial transactions.

In addition, phishing scams are becoming more and more realistic, so it is not as easy as it once was to spot a fake request. SMS texting-based scams are on the rise, so individuals are becoming cautious about responding to what they receive via those modes. The bottom line – more and more people are unwilling to take an inbound call, answer an unknown email, or communicate with someone on social media that asks for information.

Add to this the fact that millennials are notorious for avoiding actual “live” phone conversations, and you have a serious problem for any company trying to do outbound marketing of any sort. Sure, the direct mail will still fill up the mailbox, but virtually anything communicated electronically is now suspect.

Quite a few people I know (including myself), are taking the strategy that the only time they will buy something, renew a subscription, donate to a charitable cause, or provide any personal information is when the interaction is initiated by themselves.

A need for advice

This has some serious implications for the insurance industry – both negative and positive. The contact center operations with predictive dialers and other advanced technologies are used extensively by many insurers, especially the Tier 1 companies. And these outbound calls are not just for marketing and prospecting, but also for existing policyholders for insurance-to-value assessments, customer satisfaction surveys, and other activities. Emails are also prevalent among insurers for prospecting and for communicating with policyholders and members. Insurers, as well as other industries, may face more and more resistance to these approaches over time.

If there is any silver lining in this, it comes from the enormous societal need for advice on preventing and dodging these scams and for indemnification against these types of attacks. Insurers have the opportunity, and perhaps the obligation, to determine the industry role in this area. Cyber liability coverage could be expanded significantly across all lines of business. Loss control engineering should increasingly include expertise in these areas to help customers. Insurers should be active in promoting legislation, encouraging technology solutions, and finding other ways to thwart this increasing threat.

It may sound like hyperbole to say that direct marketing is headed for a crash, but preemptive actions by insurers, other industries, and governments need to kick into overdrive if this problem is to be solved … not just for the sake of marketing, but for the protection of the customer as well.