Data from the Insurance Research Council has indicated that there is about $5 to $7 billion in inflated auto insurance claims made every year, though the overall cost that would occur if insurance companies in any sector did not make efforts to detect scams would be significantly higher.
Every time fraudulent claims get past the insurers, the end result is that the cost will trickle down to the clients and lead to higher premiums. Therefore, insurance companies have put extensive efforts into place to help prevent scams from occurring in the first place and to recoup any money that they do pay into false and fraudulent claims.
There are two primary forms of scam to insurance companies, which are: inflated or false claims, and a risk to premiums ratio that is too high. In order to detect them, there are various methods that insurers use, including the following:
• Whistle-blowers – insurance companies depend on third parties to report instances of fraud. Most insurers have anonymous tip lines where these individuals can make those reports. Typically, legal protection is provided for whistle blowers in order to protect them against any form of retaliation in case they are reporting the fraudulent claims of a company where they work.
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• Analysis – by analyzing a claim and comparing it to similar claims, they can observe whether or not it falls within a typical range. Should it be too high, it is handed over to investigators for further examination.
• Claims history – looking into the claims history of the individual client can help to bring fraudulent activity to light. Many insurers allow for a certain number of claims within a span of time before they terminate coverage in order to protect themselves against the risk of fraud.
• Surveillance – there are some insurers that will directly monitor clients. This is commonly done when disability or health insurance claims are made, when they say that they cannot work as a result of those injuries.
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