Insurance fraud is a more significant problem than many people around the world might realize. It has long become a trend as many perpetrators are increasingly inventive of new strategies. Insurance fraud occurs when someone consciously lies to obtain an advantage or benefit to which they are not entitled.
It may also occur when the insurer knowingly denies a benefit that is due to someone. Some common scams orchestrated by perpetrators include individuals falsely claiming the loss of an expensive piece of jewelry. Some Fraudsters may even instigate accident instances to satisfy their greed.
Others might create counterfeit vehicle titles or registrations for nonexistent high-value antique or luxury cars, subsequently reporting these cars as stolen to file a claim. According to the Coalition Against Insurance Fraud, these fraudulent activities cost Americans at least $80 billion annually.
They span various sectors, including health insurance, property insurance, auto insurance, and workers’ compensation. While 78 percent of Americans express concern about insurance fraud, some consider minor deceptions, like padding a claim to cover a deductible, acceptable.
Despite its prevalence, insurance fraud is not overlooked. Insurers actively combat fraud through numerous strategies, including the use of artificial intelligence (AI). Here are 10 ways insurance agents can spot fraudulent claims.
10: Analyze Claims History:
If you’ve submitted many claims or reported numerous losses, these are immediate red flags. Hence, any new claims you file will be closely scrutinized. This is particularly true for homeowners and auto insurance. Insurers analyze your past claims to identify patterns regarding their frequency and type.
Insurance companies maintain detailed records and conduct various analyses to interpret the data. This includes predicting who is most likely to file a claim, as well as when and where. If your claim deviates from typical patterns, they’ll notice.
9: Checklist of “Suspicious Loss Indicators”:
The National Insurance Crime Bureau (NICB) has developed a list of 23 “suspicious loss indicators.” These indicators suggest that a claim might be fraudulent. While the list isn’t secret, many submitting fake claims are unaware of its existence. Here are a few suspicious loss indicators insurance agents look for:
- A claimant who is calm and unflustered after submitting a large claim
- A claimant who submits handwritten receipts for repairs
- A claimant who increases coverage shortly before submitting a claim
- A fire-damage claim following a family argument or shortly after family members leave the home/car
- A medical claim from a seasonal employee whose job is ending
These scenarios can appear in legitimate claims, but they prompt insurers to investigate further.
8: Use Private Investigators:
In the movies, you might see someone faking whiplash after a car accident and later getting caught by a private investigator. This scenario happens in real life too. Private investigators stake out claimants and use various tactics to uncover fraud.
They might research backgrounds, review criminal records, interview claimants and witnesses, and inspect sites. Some insurance companies hire private investigators on a freelance basis, while others employ them full-time, often selecting those with law enforcement or investigative backgrounds.
7: Look for Evidence of Personal Injury Mills:
One prevalent insurance fraud scam involves vehicle crashes resulting in both legitimate and exaggerated injuries. This scam can unfold in various ways. For example, after a car crash, you visit a chiropractor who improperly bills the insurer for non-existent injuries.
Lawyers might then persuade you to negotiate a settlement based on these “extensive” injuries. This makes you an unwitting participant in the scam. In other cases, accident victims are asked to participate in return for a cut of the profits.
Typically, medical providers or lawyers involved in such practices repeat the same scam. If insurers notice a particular provider frequently submitting claims for accident victims receiving similar treatments, it raises a red flag.
6: Use Sophisticated Computer Systems to Detect Suspicious Billing:
Fraud often occurs through billing, especially with medical claims. Physicians or clinics may bill for services never rendered. To make matters worse, they may even bill for unnecessary procedures, inflated costs, duplicate charges, or unbundled claims.
Nonetheless, Insurers use complex computer systems to help identify suspicious billing patterns from medical providers. Billing fraud also occurs with auto repairs. Some insured individuals ask repair shops to include their deductible in the bill.
Some shops may bill insurers for new parts while using reconditioned ones. Hence, computer systems are often deployed to identify inflated repair costs or discrepancies in claim information.
5: Hand the Case to the Special Investigation Unit:
Many insurers have Special Investigation Units (SIUs) staffed by former detectives, police officers, and medical personnel. SIUs conduct various tests and analyses to detect fraud. Examples include:
- Conducting burn-pattern analyses and computer simulations on fire-damaged cars and homes to determine if the fire was intentional.
- Matching claimants’ injuries to the reported accident.
- Investigating vehicle damage to ensure it aligns with the accident report, using rust and wear pattern analysis to detect old damage.
- Performing financial reviews on claimants, with those behind on car or mortgage payments flagged as potentially fraudulent.
4: Evaluate Prospective Employees’ Credit Histories:
Insurance fraud can also originate within insurance companies. Claims adjusters and agents may commit fraud by skimming money or stealing premiums. To prevent this, insurers run credit checks on prospective employees. Applications from those with bad credit or financial issues are flagged as higher fraud risks.
3: Check on Claimants Through Social Media:
Insurers are now leveraging social media to monitor suspicious claims. Interestingly, this approach is similar to how private investigators catch fraudulent claimants in the act. A claimant might boast about deceiving their insurer on Facebook or Twitter, or even post a YouTube video showing how to create fake hail damage on a car.
Surprisingly, many people are bold enough to share such information publicly. Social media is particularly useful in disability fraud cases, where a quick check of a claimant’s Facebook photos and posts can reveal if they are truly disabled.
2: Solicit Assistance From General Public:
Insurance fraud affects not just insurance companies but also consumers. According to FBI statistics, non-health insurance fraud costs over $40 billion annually. As a result, there has been a hike in premiums for consumers (an increase of $400 to $700 per year). Insurers are increasingly seeking help from the public to combat fraud by:
- Checking medical and repair bills to ensure they only list services performed.
- Calling the police, filing a report, and taking photos if involved in a fender-bender to have proof if the other party falsifies a claim.
- Being cautious of doctors who push for personal injury claims when not injured, as they might be part of a scam.
1: Perform Cross-Checks
One effective method for catching fraudsters is basic cross-checking, where insurers look for patterns in the checks issued for claims. Receiving multiple checks at the same address or large claims paid to the same person are red flags.
Insurers don’t rely solely on their own databases for this. They use ISO ClaimSearch, an anti-fraud information system created by the Insurance Services Office, Inc., covering over a billion auto, property, and liability claims. Cross-checking against this extensive database helps detect staged accident rings and multiple claims for the same loss.
Insurance Adjusters FAQ
What is the role of an insurance adjuster?
An insurance adjuster investigates claims to evaluate the insurance company’s liability, handling both personal injury and property damage claims.
Are insurance adjusters in demand?
There has been a 2.5 percent increase in the demand for insurance adjusters over the last few years.
What do claim adjusters look for?
They collect hospital records, accident reports, police reports, and other data to determine insurance costs. For car damage, they might require the car to be sent to a licensed repair shop.
How much do insurance field adjusters make?
On average, insurance field adjusters earn $63,000. The top 10 percent can make up to $100,000, while the lowest 10 percent earn around $40,000.
Is claims adjuster a stressful job?
Yes, insurance adjusters often experience burnout due to the high workload and the stress of frequently delivering bad news to people.
