Why InsuranceTech Companies Need to Rethink Identity Security

Insurers are building faster, smarter, always-on digital experiences to keep up with customer demands. Whether it’s a mobile claim submission or API-powered policy updates, the industry is fully embracing digital transformation. But here’s the problem: every new convenience opens another door. And behind that door could be identity fraud, API abuse and compliance headaches. 

Here I’ll explore why identity security needs to be at the center in these new circumstances, and how InsuranceTech firms can adopt an identity-first approach to protect their customers and business.

Modern Insurance Security Challenges

Insurance companies store large amounts of sensitive personal data, from medical records to financial details, making them prime targets for cybercriminals. 

And the more digital touchpoints you offer, the bigger the attack surface becomes. We've seen this for a few years now; in a report, 42% of European insurance leaders reported a sharp rise in security vulnerabilities  - and this number is most definitely growing. 

Here are some of the specific security challenges insurers must address:

Identity Fraud and Account Takeovers

Fraudsters have always been impersonating customers to file false claims or steal benefits. Now they are no longer faking paperwork - they’re faking people. In the US alone, the insurance industry, excluding health insurance, already loses an estimated $40 billion per year to fraud.

The shift to online onboarding and self-service has, in some cases, made it easier for criminals to create synthetic identities or use stolen personal data. Credential stuffing and phishing attacks make things worse. With a fake but valid login, malicious actors can access personal data or submit bogus claims while appearing as legitimate users. This kind of identity breach can go undetected until significant damage is already done.

API Security Vulnerabilities

InsuranceTech applications rely heavily on APIs used for mobile apps, partner integrations, IoT devices, and more. If these APIs aren’t properly secured, they become easy targets. Attackers can often exploit stolen tokens or credentials to fool the system. 

Weak API authentication or access control can let hackers pull massive amounts of customer data or even manipulate policy details.

Growing Regulatory Pressure

Insurance companies face a complex set of regulations on data security and customer privacy. 

From broad frameworks like the European GDPR and California CCPA to industry-specific rules like the NAIC Insurance Data Security Model Law in the U.S., compliance requirements continue to grow. 

Regulators are holding insurers accountable for protecting customer identities and reporting breaches promptly. Failing to comply can lead to legal penalties, and reputational damage. The challenge is to meet these overlapping requirements efficiently and without disruption.

Why Better UX Shouldn’t Come at the Cost of Security

Insurance is a competitive space. Customers expect instant quotes, self-service options and quick claims processing. But they also want their data to be secure. However, cumbersome logins, repetitive identity checks or multi-step forms can drive people away.

Leading insurers recognize this dilemma – they want both security and simplicity. The good news is that modern approaches can achieve both.

The Identity-First Approach

To address these challenges, InsuranceTech companies must recognize identity as the foundation of security. This involves:

Strong Authentication Across All Interactions

Given the prevalence of credential theft, insurers should deploy robust authentication methods. Multi-factor authentication (MFA) is now a baseline requirement for many apps and websites, adding an extra layer of protection against unauthorized access. Beyond MFA, passwordless authentication using biometrics, magic links, passkeys or hardware security keys enhances both security and usability.

Federated identity and single sign-on (SSO) solutions streamline authentication by allowing customers to log in via trusted digital identities, such as bank credentials or national ID systems. These methods reduce password fatigue, minimize attack surfaces, and improve user convenience.

Securing APIs with OAuth and Zero Trust Principles

APIs require identity-centric security just as much as user log-ins do. API keys are not enough on their own and can often result in serious consequences. Instead, insurers should implement OAuth 2.0 and OpenID Connect (OIDC) to manage API authentication and authorization securely.

OAuth 2.0 enables secure token-based access, ensuring that clients (mobile apps, web apps, and partner integrations) receive scoped, time-limited tokens. OpenID Connect builds on OAuth 2.0 to provide identity verification, allowing insurers to establish trust in API-driven transactions.

To further strengthen the safety of applications and APIs, InsuranceTech organizations should consider implementing the use of FAPI. This will greatly improve the process of issuing and safeguarding access tokens.

Zero Trust principles add an extra layer of security by requiring continuous verification for every access request. Instead of assuming trust, each API request needs to be validated to ensure user roles, attributes, and security context match the right permissions.

Compliance-Driven Security

An identity-first approach ensures security and compliance go hand in hand, reducing fraud risks and improving operational efficiency.

OAuth 2.0’s token-based approach ensures secure access delegation without exposing credentials, meeting key data protection requirements outlined in GDPR and similar frameworks. OpenID Connect enhances authentication assurance, simplifying identity verification and fraud prevention mandates while reducing friction for users and building customer trust in digital services. 

Enhancing Customer Experience Securely

Security and convenience no longer need to be at odds. Adaptive authentication techniques dynamically adjust security requirements based on risk level:

• Low-risk interactions, like checking a policy balance from a familiar device, may only require a simple login.

• High-risk actions, such as changing a payout account or filing a large claim, may trigger additional authentication steps like biometric verification or multi-factor authentication (MFA).

• Seamless identity proofing during the account registration process using facial recognition technologies. This involves detecting a live user as well as scanning the user's ID.

By leveraging user journey orchestration, insurers can optimize authentication flows based on real-time risk assessments. Instead of a one-size-fits-all security model, you can fine-tune authentication requirements based on behavioral patterns, location, device trust, and session history. Enforcing strong security where needed while maintaining a smooth user experience.

Conclusion

Identity security is the foundation of digital insurance. A single breached account or compromised API can break customer trust and lead to regulatory scrutiny. A strong, identity-first security strategy enables seamless user experiences, stronger fraud prevention, and business agility.

Updating identity security isn’t just about reducing risk - it facilitates growth, enables seamless integrations, and creates room for innovation.