How to find fraud in insurance claims

January 16, 2020 / 5 min read

Last updated on October 24, 2023.

According to the National Insurance Crime Bureau (NICB), insurance fraud is the second most costly white-collar crime in the United States, following tax evasion. Even if you haven’t suffered a direct loss, your insurance premiums may still go up because of hard and soft fraud. These crimes add up to nearly $30 billion a year for insurance companies.

For insurers looking to stem the billion-dollar insurance claims fraud problem^[1], early detection is key. But with caseloads rising and hundreds of thousands of adjusters retiring , it’s tough for claims staff to keep a watchful eye on suspicious behavior. Patterns and connections amongst claims may be harder to unveil without access to the bigger picture. That’s why access to advanced tools and expansive data is so important.

Unlocking industrywide insurance data

The answer is for insurers to look beyond their own data. Checking the full scope of claims information for matches is essential as a first step in insurance fraud detection. The industrywide claims data in ClaimSearch® provides access to billions of claims details from nearly 97 percent of the property/casualty industry. When the system matches an incoming claim, it can reveal that the damage you’re trying to claim is actually part of an earlier claim or series of exaggerated claims. With this database, claims handlers can also easily see red flags of potential fraud, such as prior SIU (Special Investigations Unit) activity.

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Tapping multiple data sources to discover claims fraud

When there’s reason to believe an insured loss is suspicious, it’s essential to have a 360-degree view of the claim. Clues to insurance fraud could lie in details about the insured, the property, body shops, and medical providers on the claim. When the SIU gets involved, investigators may want detailed vehicle data, medical records, social media posts, criminal records, and much more. In an auto theft claim, for example, investigators may wish to pull a report that shows geo-tagged, time-stamped license plate photos from around the country. These may reveal a supposedly stolen car is actually garaged at the claimant’s brother’s house. But gathering all these pieces of information can be an exhausting manual process. Fortunately, ClaimSearch offers integrated access to the Decision Net^® supplemental data portal. Decision Net gives adjusters and SIU investigators a single point of access to hundreds of reports for a full claims picture.

Finding the missing links that reveal organized insurance fraud

When an organized insurance fraud network is revealed, it’s like seeing the strands of a spider web—far-reaching, plentiful, with multiple points of connection. But your claims office would likely see only one part of the bigger swindle because organized insurance fraud rings can sweep across regions and even state lines with schemes involving many insurance carriers. Insurance fraud rings are big business, and they can score millions of dollars in claims before they’re done. Rings are led by smart criminals who trade in staged car crashes, fake injuries, unscrupulous medical providers, on-the-take body shops, and crooked lawyers. Being able to see that a fraud network is behind the suspicious claims in your book of business depends on having a broad view of claims beyond your own company. Insurers can turn to network analytic tools like NetMap^® to reveal the hidden connections in fraud networks and stop the losses from them.

Diagnosing medical provider fraud in bodily injury claims

While detecting fraud in property/casualty claims with an injury component is challenging, the expense of these scams makes it a worthwhile endeavor to seek them out. In fact, one study estimated that $5.6 – 7.7 billion in auto bodily injury claim payments were fraudulent during a single year^[ii]. This specialized world of medical fraud, waste, and abuse includes billing for unnecessary diagnostic tests, prescribing overly expensive treatments, and using complicated billing codes as a smoke screen^[iii]. Without expertise in both medical practices and medical billing codes and procedures, it can be a huge challenge to find fraudulent behavior. While medical billing review companies make sure that statements are correct, they aren’t equipped to find fraudulent and abusive provider behavior. Fortunately, insurers can take advantage of a predictive analytics solution with expert oversight that accesses billions of medical records—MedSentry^®. The system flags suspect providers and uncovers billing irregularities, such as excessive treatments for minor injuries.

Using predictive analytics to screen claims quickly

With today’s insurance customers expecting ever-faster settlements, it’s easy for fraud to slip through the cracks. Finding suspicious claims quickly has never been so important. Leveraging the most advanced technology, insurers can catch fraud before they lose money to fake losses. Today, insurers can turn to ClaimDirector^SM, a predictive analytic claims-scoring system that scans incoming claims for suspicious markers and then assigns a score to every claim. This analytic tool gives adjusters and SIUs a quick way to determine whether a claim can be fast-tracked toward payment—or whether it should be investigated further.

Fighting insurance fraud is possible with the right tools

Today, fraudsters are getting more sophisticated—creating fake identities, doctoring photos, staging accidents, and more^[iv]. But the good news is that fighting insurance fraud is possible with the right analytic tools. By incorporating claims matching and scoring into the adjusting workflow, insurers can take a proactive stance against claims fraud. For cases where suspicious activity is found, SIUs can dig into supplemental data reports to find evidence that fraud occurred. Insurers can also access a predictive analytic tool to check medical bills for signs of fraud, waste, and abuse to stem leakage in injury claims. And all of those investigations can now be better managed with a new workflow platform. Insurers that invest in the advanced fraud-fighting technology available today will protect their bottom line and be able to offer customers better service and lower premiums.

[i] https://www.iii.org/article/background-on-insurance-fraud

[ii] https://www.iii.org/article/background-on-insurance-fraud

[iii] https://www.nhcaa.org/resources/health-care-anti-fraud-resources/the-challenge-of-health-care-fraud.aspx

[iv] https://www.iii.org/article/background-on-insurance-fraud