From time to time, we get asked this question. It’s either from the naturally curious, or from someone who is considering doing something they probably shouldn’t. People ask
How do insurance companies detect fraud? Is it a gut feeling, or is it something in their computers? How much money has to be involved before they care about fraud?
It’s a great question and we’ve got a few answers, so let’s jump right in.
How Do Insurance Companies Detect Fraud?
How do renters insurance companies detect fraud? Is it all in the computers, or does good old intuition enter into it? How much can I claim before they look for fraud?
How Do Insurance Companies Detect Fraud?
Sometimes, it’s obvious. For example, a claim for something the insured probably never owned and can’t produce any documentation for, will be scrutinized. One of the front line defenses though is to analyze claims history. You may think the carrier will only see claims that you filed with them. But, you’d be wrong. Insurance companies all share information about claims into a central database, and both underwriting and claims generally have access to it. Was there a similar claim shortly before you cancelled your last policy? Big red flag. Do you file a claim every few months? Big red flag. Do you have two policies covering the same thing and you’re trying to claim on both? Yet another, big red flag. The insurance companies know more about your claims history than you do.
How Do Insurance Companies Detect Fraud With Suspicious Claims Indicators?
How Do Insurance Companies Detect Fraud?
Did you know there’s a list shared by carriers of things that automatically make a claim suspicious? We’re not going to publish the whole list, but let’s look at a few that might be relevant to renters insurance claims.
- Claimant is in financial distress, worse off than they were when the policy started, or claiming shortly after the inception of the policy
- Increases in policy limits shortly before an alleged loss occurs
- Missing police reports, where appropriate
- Valuable items removed from the premises shortly before a fire loss
- Firefighters unable to gain access due to items blocking doors, etc.
- Slip and falls with no witnesses
- Altered documentation
- Delayed reporting of a claim
In no way do any of the indicators prove fraud. They just create reasons to look deeper into a claim. There may be fraud, or it may just be odd circumstances. Did you loan your 50 inch TV to a friend for their Super Bowl party? Technically that’s removal of valuable items before a fire, but there’s a legitimate explanation. Also, there are people who can say they saw your TV, or heard the conversation about when your friend would give it back.
How Do Insurance Companies Detect Fraud? Private Investigators
Private investigators are a dime a dozen, and even the good ones aren’t expensive relative to claims. One Florida private investigator, a retired Secret Service agent, charges $80 an hour for investigations. In the scheme of a large claim, that’s not a great deal of money for an insurance company to spend to root out fraud, especially on potentially large injury liability claims.
The insurance industry has developed sophisticated algorithms to detect fraud, as well as relying on tried and true methods like raising questions if multiple claim checks are being sent to the same address. Generally, a carrier will always investigate a suspicious claim, rather than just paying. A ten dollar claim is just as likely to be investigated as a ten thousand dollar claim. Why? Because fraud means higher prices for everyone, and also means that someone received something they were not entitled to.
To learn more about renters insurance, contact Effective Coverage at (800)892-4308.