Insurance Fraud: Types and Detection

Insurance fraud is any act that intentionally violates an insurance process. This occurs when claimants attempt to obtain some benefit or advantage they are not entitled to or when an insurer deliberately denies some benefit that has to be provided.


Insurance fraud poses a significant problem to society. Governments and businesses have to take action to block or reduce its negative influence.


Insurance Fraud: Types and Detection


Insurance fraud is not as visible and readily apparent as other crimes. Investigations reveal that approximately every tenth dollars is wasted because of fraud, resulting in losses of more than $100 billion annually.


Types of insurance fraud


  • Life insurance. Life insurance fraud begins at the application stage when dishonest applicants provide falsified personal information to obtain cheaper insurance rates. Life insurance fraud may even involve faking a death to claim life insurance.
  • Health insurance. Health insurance fraud can be committed either by an insured person or by a healthcare provider. For example, healthcare providers may bill for more expensive treatments than those actually rendered or schedule unnecessary extra visits for patients. A complex scheme could involve referring patients to other medical professionals when no further treatment is actually required.
  • Automobile insurance. Fraudsters may fake traffic deaths or auto collisions to make false insurance or exaggerated claims to collect funds from insurance policies. Researchers estimate that almost every fourth auto insurance claim contains elements of suspected fraud. There are many types of schemes, including staging an accident with an innocent party or exaggerating claims to make as much as possible from the insurance company.


Detection of insurance fraud


The detection of insurance fraud can be enhanced by increasing control over the claim process. The first step is to identify suspicious claims that have a higher possibility of being fraudulent. This can be done by computer/machine automation tools or initiated by insurance agents.


Due to the enormous number of claims submitted each day, it's impossible to check every case manually. Instead, partnering with an automation tools supplier allows insurance companies to remain vigilant and expand their fraud detection capabilities.


Machine detection does not make statements on or adjudicate suspicious cases of fraud. It simply identifies suspicious claims that must be investigated further.


Insurance companies' investigators can also search for additional evidence that supports an allegation of fraud.


The facts uncovered by these analyses can then be used to ban the claimant or prosecute fraudsters if the violation is sufficiently severe. A strong relationship between technology and expertized investigators can help organizations defend against losses due to fraud.




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