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10 Ways Insurance Agents Spot Fraudulent Claims

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Insurance fraud is a bigger problem in the United States than you might guess. And the people who commit it are increasingly creative. While there are plenty of common scams out there — like pretending you lost an expensive piece of jewelry, then filing a claim — fraudsters also perpetrate scams by, say, staging car accidents.

For example, a motorist in front of you may suddenly hit the brakes in the hopes you’ll hit him; if you do, he’ll then fake an injury. Or someone may craft a counterfeit vehicle title or registration for a nonexistent (but expensive) antique or luxury car, then report the car stolen and file a claim.


Such rip-offs cost Americans at least $80 billion a year, according to the Coalition Against Insurance Fraud, and stretch across all fields, including health insurance, property insurance, auto insurance and workers’ compensation. While 78 percent of Americans say they’re worried about insurance fraud, some people deem minor rip-offs acceptable, such as padding a claim to cover the deductible you’re required to pay.

Yet while insurance fraud may be widespread, it’s certainly not being ignored. Insurers are constantly working to thwart fraud through a wide variety of means, including the use of artificial intelligence (AI). So before you ponder submitting a fraudulent claim, check out these 10 ways in which such a claim might be scrutinized. And if you’re found guilty, it may mean a hefty fine or the slammer for you.

10: Analyze Claims History

Submitted a lot of claims during your lifetime, or claimed a lot of losses? Those are immediate red flags, and anything you submit will be closely scrutinized. This is especially true when it comes to homeowners and auto insurance.

Insurers also try to discern any patterns in your past claims regarding their frequency and type. You may not realize it, but insurance companies keep in-depth records on claims and do all sorts of analyses to interpret the data they contain — everything from figuring out who is most likely to file a claim, to when and where. If your claim doesn’t match the typical pattern, they’ll notice.


9: Checklist of “Suspicious Loss Indicators”

The National Insurance Crime Bureau (NICB) — did you even know there was one? — has developed a super-secret list of 23 “suspicious loss indicators”. These are items within a claim or its circumstances that signal the claim may be fake. Bogus. A rip-off. OK, the list really isn’t “super-secret,” but a lot of the people submitting fake claims don’t realize this list exists, and that it may lead to their downfall.

Here are just a few of the suspicious loss indicators insurance agents look for:


A claimant who’s totally calm and unflustered after submitting a large claim

A claimant who submits handwritten receipts for repairs on a covered item

A claimant who adds or increases homeowners or auto insurance coverage shortly before submitting a claim

A fire-damage claim for a home or auto where the fire started immediately after a family argument, or shortly after family members left the home/car

A medical claim submitted by a seasonal employee whose job is ending

Of course, some of these scenarios can be present in legit claims. But don’t worry. Insurers know they’re not positive indicators of fraud — just possible ones — yet definitely signs they should further investigate certain claims.

8: Use Private Investigators

In the movies, you often see someone faking whiplash after a car accident. After the person gives a false statement to authorities, the movie cuts to the person at home — sans the big foam collar — engaging in an athletic endeavor that would be impossible if they really had whiplash. Next scene: A private investigator, hiding in the bushes, snaps a photo of the “victim” and takes off.

That’s not just the stuff of Hollywood. Private investigators do stake out insurance claimants at times for just such reasons. They also use less dramatic tactics to uncover fraud, such as researching claimants’ backgrounds through perusing criminal records, interviewing claimants and any witnesses, and inspecting pertinent sites.


While some insurance companies hire private investigators on a freelance basis, many employ PIs, often selecting those with backgrounds in law enforcement and private investigation.

7: Look for Evidence of Personal Injury Mills

One of the more popular insurance fraud scams involves vehicle crashes that result in both legitimate and fake/exaggerated injuries. The scam can work in many ways. Say you’re in a car crash and your back hurts. You go to the chiropractor, who improperly bills the insurer for nonexistent injuries. Then, maybe lawyers swoop in and persuade you to let them start negotiations for a settlement based on your “extensive” injuries. You end up being part of the scam, but unwittingly. Other times, accident victims are asked to participate in such a scam in return for a cut of the profits.

Typically, those involved in such practices — certain medical providers or lawyers — will perform the same scam over and over. If insurers notice a particular provider submitting numerous claims over time for accident victims that coincidentally receive a similar treatment regimen, that’s a big red flag.


6: Use Sophisticated Computer Systems to Detect Suspicious Billing

Fraud often occurs through billing, and quite often for medical claims. Physicians or clinics may bill insurance companies for services never rendered, for example, or for procedures or services that weren’t medically necessary. Or they may jack up the cost of certain services, charge more than once for the same service, or “unbundle” claims for three separate surgeries on a patient whose three toes were operated on at the same time. Complex computer systems have been developed to tease out suspicious bills and billing patterns from physicians and medical establishments.

But billing fraud isn’t limited to medical claims. Auto repairs are another area rife with billing fraud. When some insureds discover their car insurance will cover the cost of repairing their dented hood — after they pay their deductible — they’ll approach their repair shop and see if the cost of their deductible can be added to the bill. Wink, wink, nudge, nudge.


Most reputable shops will refuse, of course, but there are plenty willing to comply. Or the shops themselves will, say, slap a reconditioned bumper on your car, then bill your insurer for a new one. Again, in these situations, insurance companies’ computer systems can pull up claims where repairs appear inflated, or don’t square with other claim information.

5: Hand Case to Special Investigation Unit

Many insurers have special investigation units, or SIUs. Employees who work in SIUs generally have backgrounds as detectives, police officers, medical personnel, etc. They’re capable of performing an amazing array of tests and checks to bust anyone trying to commit fraud. Here’s just a sampling of what they can do:

Conduct burn-pattern analyses and computer simulations on cars and homes damaged by fire to determine if the fire was intentionally set or accidental.

Determine if a claimant’s injuries match a reported accident.

Investigate damaged vehicles to see if the resulting dents and scratches jibe with the accident report. Also, use rust analysis and wear patterns to see if your car’s damage is actually from an old accident.

Conduct financial reviews on claimants. Auto or homeowners claims from those who are behind on car or mortgage payments are immediately flagged as potentially fraudulent.


4: Evaluate Prospective Employees’ Credit Histories

Insurance fraud isn’t limited to external sources. There’s a certain amount of it that originates with insurance companies’ own staff members. Claims adjusters cut a lot of checks, for example, and unethical folks may try to skim a few bucks off the top.

Agents can commit fraud by “stealing” customers’ car insurance or life insurance premiums. Under this common scam, an agent may take your insurance payment, then pocket it without ever actually purchasing a policy for you. Savvy insurance companies try to prevent such fraud by running credit checks on all prospective employees. Applications from those with bad credit or financial issues are flagged as those more likely to commit fraud.


3: Check on Claimants Through Social Media

Much like the private investigator who spies the supposedly bed-ridden claimant salsa dancing the night away, insurers are now using social media to check up on suspicious claims. Perhaps the claimant who said his car suffered hail damage will be bragging about his deception on Facebook or Twitter, or will upload a video on YouTube showing how to create fake hail dents in your car’s hood.

Who would be that bold? Luckily for insurance companies, plenty of people. Social media’s biggest application in claims fraud, though, is in disability cases. A quick look at a claimant’s Facebook photos and postings often makes it clear whether the person is truly disabled.


2: Solicit Assistance From General Public

Insurance fraud isn’t just a problem for insurance companies. It’s your problem, too. According to FBI statistics, non-health insurance fraud costs more than $40 billion annually, which you cover by paying annual premiums $400 to $700 higher than they’d be if there were no fraud at all.

Outraged? Insurers sure hope you are. They’re also increasingly vocal about asking their customers to help them out by:


Checking all bills for medical services, auto repairs, etc. to make sure they list only the services and repairs that were performed

Calling the police if you’re involved in a fender-bender, then filing a report and taking photos of the damage to both cars. This way, if those in the other vehicle try to falsify a claim, you’ll have proof of what really occurred.

Being leery of doctors who push you to file a personal injury claim after an accident, even if you weren’t injured. They make be in cahoots with others.

1: Perform Cross-Checks

One of the easiest ways for insurers to catch crooks is via a basic cross-check, where they look for simple patterns in the checks they’re sending out to pay claims. If the same person is receiving numerous checks, that’s a warning sign. So is the payment of several big claims to the same address, even if the name on the check is different. It’s not rocket science, but it works.

Cross-checks aren’t limited to an insurer’s database, either. Thousands of insurance companies, self-insured entities and third-party administrators report all of their claims to ISO ClaimSearch, an anti-fraud information system. The system was created by Insurance Services Office, Inc., and covers auto, property and liability claims. Cross-checking a new claim against all of those in this database (1 billion-plus) makes it easier to sniff out staged-accident rings, finger those submitting multiple claims for the same loss, and other scams.

Lots More Informatio

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Barrett, Stephen. “Insurance Fraud and Abuse: A Very Serious Problem.” Quackwatch. (Feb. 21, 2012) http://www.quackwatch.com/02ConsumerProtection/insfraud.html

Coalition Against Insurance Fraud. “Fraud Stats.” (April 11, 2022) https://insurancefraud.org/fraud-stats/

FBI. “Insurance Fraud.” (April 12, 2022)https://www.fbi.gov/stats-services/publications/insurance-fraud

Megna, Michelle. “8 Great Ways to Get Busted for Auto Insurance Fraud.” Insurance. March 3, 2009. (Feb. 21, 2012) http://www.insurance.com/auto-insurance/claims/8-great-ways-to-get-busted-for-auto-insurance-fraud.aspx

Insurance Information Institute. “Insurance Fraud.” July 2011. (Feb. 21, 2012) http://www.iii.org/media/hottopics/insurance/fraud/

Insurance Journal. “Insurance Claim-Padding OK with 24% of Americans: Survey.” March 20, 2013. (April 11, 2022) https://www.insurancejournal.com/news/national/2013/03/20/285243.htm

Insurance Networking News. “11 Dumbest Insurance Fraud Cases.” March 21, 2011. (Feb. 23, 2012) http://www.insurancenetworking.com/news/insurance_fraud_claims_coalition_against_insurance_fraud_SIU-27440-1.html

Medicare. “Fraud & Abuse.” (Feb. 21, 2012) http://www.medicare.gov/navigation/help-and-support/fraud-and-abuse/fraud-and-abuse-overview.aspx

Money Q&A. “Insurance Companies Can Easily Spot A Fraudulent Claim.” April 25, 2011. (Feb. 21, 2012) http://moneyqanda.com/insurance-companies-easily-spot-fraudulent-claim/

Nationwide. “Recognizing Insurance Fraud.” (Feb. 21, 2012) http://www.nationwide.com/insurance-fraud.jsp

Private Investigator. “What Do Insurance Investigators Look For?” (April 12, 2022) https://mikeinvestigation.com/what-do-insurance-investigators-look-for/

Theim, Rebecca. “Busted! Part 1: How insurance companies spot bogus claims.” Insure. (Feb. 21, 2012) http://www.insure.com/car-insurance/suspicious-loss-indicators.html

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