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Insurance Fraud Investigators

The Job

The National Insurance Crime Bureau reports that insurance fraud is the second most costly white-collar crime in the United States after tax evasion—costing the nation roughly $80 billion per year. It is estimated that the average U.S. family pays an additional $400 to $950 a year in increased premiums as a result of insurance fraud.

There are two types of insurance fraud: hard and soft. Hard fraud occurs when an individual or organization deliberately fabricates a claim. Examples include staging fake automobile accidents, claiming a workplace injury that did not occur, and committing arson to obtain insurance funds, while claiming the fire was accidental. Soft fraud involves introducing an element of fraud to an otherwise legitimate claim. Examples include adding previous damage to a vehicle to a claim for compensation for new damages that occurred in a car accident, lying about the dates on an insurance claim, or misrepresenting personal information on an insurance application.

Insurance fraud occurs in many areas, including:

  • health insurance
  • car insurance
  • home insurance
  • life insurance
  • workers’ compensation
  • insurance company fraud

Insurance fraud investigators first review suspicious claims to determine if fraud has occurred and use fraud protection software to identify potential instances of fraud. When they suspect fraud, they obtain a preliminary statement from the insured or third-party claimant that provides a brief overview of the facts and circumstances surrounding the loss. This statement should be obtained as soon as possible after the loss is reported to avoid memory lapses by the claimant. They also conduct an examination under oath of the claimant (with the assistance of a court reporter) to establish the facts of a claim. Then investigators conduct detailed investigations that include surveillance (in-person and remote), interviewing claimants, checking a claimant’s activities on social media, reviewing videos from accident or fire scenes, cross-referencing information about the claimant with multiple databases, conducting a background check on the claimant, and reviewing police reports, medical bills, medical treatment records, or physical property damage. They locate witnesses and obtain facts and evidence needed by attorneys in litigation. Investigators prepare reports of the findings of their investigation for managers, and they may appear in court to testify under oath about their findings.

Other duties for investigators include cooperating with local, state, and federal law enforcement agencies to stop fraud schemes; training claims adjusters to identify “red flags” that suggest insurance fraud is being committed; and occasionally assisting in non-fraud-related insurance claims (i.e., to establish the circumstances of a multi-vehicle car crash).