Insurance fraud is a deliberate deception perpetrated against or by an insurance company or agent for the purpose of financial gain. Fraud may be committed at different points in the insurance transaction by applicants for insurance, policyholders, third-party claimants or professionals who provide services to claimants. Insurance agents and company employees may also commit insurance fraud. Common frauds include “padding,” or inflating actual claims, misrepresenting facts on an insurance application, submitting claims for injuries or damage that never occurred, and “staging” accidents.
In 2019, the Coalition Against Insurance Fraud and the SAS Institute published a report entitled, State of Insurance Fraud Technology. The study was based on an online survey of 84 mostly property/casualty insurers conducted in late 2018. Nearly three-quarters of the survey participants said fraud has increased either significantly or slightly in the past three years, an 11-point increase since 2014. No insurer has said that fraud has decreased significantly in the last six years.
About 40 percent of insurers polled said their technology budgets for 2019 will be larger, with predictive modeling and link or social network analysis the two most likely types of programs considered for investment. About 90 percent of respondents said they use technology primarily to detect claims fraud, a significant increase from 2016 and about half said they use it to combat underwriting fraud, up from 27 percent in 2016. The greatest challenges for insurers are limited IT resources, which affects about three-quarters of insurers, about the same as in 2016. This is followed by problems in data integration, with 76 percent reporting the problem, up from 64 percent in 2016.
The 2020 Insurer SIU Benchmarking Study published by the Coalition Against Insurance Fraud found that insurers are increasing office investigators and using fewer field agents in their special investigating units, increasing outsourcing investigators and legal help, and focusing on larger and more complex cases. Although field investigators account for more than half of SIU personnel, the number of desk investigators grew to 16 percent of all investigators by 2019 and have likely risen during the COVID-19 pandemic and will do so post-pandemic. Expense is a factor in using desk investigators, which are about one-third less expensive than field investigators. Overall, SIUs focus more on large fraud rings that steal the most money rather than smaller scams, resulting in time and money savings. Outsourcing both surveillance and investigation has increased by 25 percent between 2017 and 2019, while outsourcing fraud-related legal services grew from 30 percent to 40 percent by 2019.
The scale, cost and complexity of globalized insurance fraud is made worse by the ease of cross-border travel and the ability to commit fraud in one country when physically located elsewhere afforded by today’s digital environment. Despite the agreement that fraud has increased in the past few years, globalized fraud is not a current priority for insurance fraud fighters around the world, according to a 2021 study by the Coalition Against Insurance Fraud, Globalization of Insurance Fraud. More than a quarter of 271 respondents spanning 33 countries said globalized fraud is not a priority and more than half said it was a low-to-medium priority. Yet 39 percent are somewhat concerned about fraud in the future, 37 percent are very concerned and 12 percent are extremely concerned. Only 43 percent of the respondents are somewhat confident in the resources they have to combat fraud.
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