In November the GovCX Collective gathered experts in unemployment insurance (UI) for a candid conversation on fraud prevention, customer experience, and how the two are linked. Hosted alongside LexisNexis Risk Solutions, the session brought together federal and state perspectives on how to tackle fraud without sacrificing speed, access, or dignity for claimants.
Our speakers, Amy Simon, Head of Labor & Workforce Solutions at LexisNexis Risk Solutions, and Gundeep Ahluwalia, EVP and Chief Innovation Officer at NuAxis Innovations and former CIO of the U.S. Department of Labor, shared their insights on the rapidly evolving fraud landscape and the operational challenges facing citizen-facing programs nationwide. The group explored what the post-pandemic environment has revealed, why the current system is strained, and what tools and mindsets will be required to meet the moment.
Unemployment insurance in the U.S. has existed for over 90 years, becoming more vital during periods of economic uncertainty. For example, the government processed more than $850 billion in unemployment insurance claims during COVID pandemic. That level of emergency volume exposed long-standing funding gaps, outdated systems, and new types of fraud. As Amy noted, the environment has shifted dramatically from the “big, dumb identity fraud” of early 2020 to today’s targeted, AI-enabled attacks capable of defeating liveness detection and generating realistic documents. Against this backdrop, the conversation focused on what it takes to protect the system while still delivering a modern, intuitive customer experience.
If you couldn’t join us in person, here are three key lessons that emerged from our discussion!
1. Fraud Prevention is a Lifecycle Discipline, Not a Single Checkpoint
Amy emphasized that many agencies still treat fraud as an identity verification challenge. But verifying who someone is at the front door is only one layer in a much broader, more dynamic defense strategy.
The tools and practices deployed by fraudsters has evolved, and so must detection. Modern attacks use generative AI to mimic faces, forge documents, and defeat automated checks. Agencies need tools that evaluate identity, device intelligence, location data, and behavioral patterns across the entire claimant journey.
Layered verification delivers better outcomes. LexisNexis demonstrated how multiple layers including identity record matching, phone-to-person alignment, and advanced liveness checks, work together to separate real claimants from sophisticated fraud attempts.
Focus on risk management, not just compliance. A compliance-only mindset leads to rigid processes that frustrate legitimate users. A risk-based approach allows states to apply the right friction at the right moment, reducing burden while strengthening protection.
2. CX and Fraud Prevention Are Intertwined, and Better Design Reduces Both Errors and Abandonment
Unemployment insurance systems are designed to serve real people under stress. Poorly designed processes increase errors, drive up workload, and open more opportunities for fraud. A couple of areas to focus on today include:
- Strong exception pathways. High-volume programs require fallback processes that can absorb surges without creating bottlenecks or inequities.
- Interfaces that eliminate unnecessary friction. Rather than asking claimants to type information that already exists on a document and then upload the same document, states can pre-populate fields and ask for confirmation. Small design choices like these reduce error rates and speed up access.
- More data on abandonment. States need better insights into why people drop out of the process and where it occurs. Without that data, it’s impossible to determine whether controls are effective or simply blocking eligible claimants.
3. Policy, Funding, and Incentives Must Catch Up to Today’s Realities
The conversation made clear that the system’s structural limitations make modernization difficult, even when the will is there. One reason is that funding models are outdated. Administrative cost calculations still follow a formula from 1983, despite radical changes in population, technology, and fraud sophistication.
Additionally, states need incentives to pursue federal fraud recovery. Because employer taxes fund state UI, states are motivated to recoup employer-related fraud, but not necessarily federal dollars. Legislative attempts like HR 1156 aim to address this, but budget scoring challenges have stalled progress.
What about AI? AI is seen as both a threat and an opportunity. While fraudsters use AI to accelerate attacks, agencies can use the same tools to review claim patterns, detect anomalies, and keep pace in what Amy described as an emerging “AI war.” As Gundeep noted, staying still has a cost and the ROI of modernization must be part of the mission.
One thing is clear: fraud reduction and customer experience are not competing priorities; they are two ends of the same string. Strengthening one strengthens the other. By adopting a layered, risk-based approach; investing in design and data; and modernizing policy and funding structures, the unemployment insurance ecosystem can better protect the system while delivering a humane, intuitive experience for every claimant.
