Claim File Audits, LLC

Fraud Indicators

Insurance fraud, whether it is the intentional arson or the body shop padding the car repair bill to cover the insured’s deductible, will cost the insurance company money.  The amount and extent of fraud is difficult to pinpoint, as even the best of adjusters do not spot every fraudulent claim.  The Insurance Information Institute estimates ten percent of all claim dollars are spent on fraudulent claims.  The National Crime Insurance Bureau estimates ten percent or more of all claims are fraudulent.  The Coalition Against Insurance Fraud estimates eleven percent to fifteen percent of the claims are fraudulent.   Whether fraud is ten percent or fifteen percent or somewhere in between, it is costing the insurance industry billions of dollars each year.

Over the course of many years, the insurance industry has identified actions by insureds or claimants that often point to fraud.  These “red flags" do not prove fraud even when several of them are present in one claim.  They do point to claims where the adjuster should proceed with caution and consider further investigation into the validity of the claim.

Red Flags for Liability Claims

The claimant provides inaccurate/incorrect personal data information—telephone number, address, employer, social security number, driver’s license number

The claimant’s address is a post office box, relative’s address, friend’s address

The claimant demands a quick settlement

The claimant forgets pertinent accident details or gives different versions of the accident or a rehearsed version of the accident

The claimant has extensive knowledge of insurance terms and policy information

The claimant refuses to provide medical authorization and/or wage authorization and insist on providing all documentation

The claimant provides vague employment information

The claimant hand delivers all documentation and avoids the use of the U.S. Mail

The claimant has an extensive claims history

There are numerous unrelated people in a claimant vehicle are treated by the same doctor—or have the same injuries—or the same attorney

The claimant obtains immediate representation by an attorney

All the injuries are subjective – headaches, whiplash, soft tissue, etc.

The insured is too eager to accept responsibility/blame

The claimant is willing to take a quick small settlement rather than document the injuries or wages

No witnesses were present at a location and a time where witnesses would have been abundant

The accident details reported do not correlate with the accident scene

The accident occurs shortly after policy inception or shortly after insured raises liability limits

There are no witnesses for slip and fall accidents

The claimant threatens adverse publicity if claim is not settled quickly or is not settled for what the claimant demands

Red Flags for Workers’ Compensation

The claimant is a disgruntled employee, or on the verge of being laid-off or terminated for cause

The claimant has an early Monday morning “accident” before the co-workers or supervisor sees him on the job (real injury may be the result of weekend occurrence off the job)

The claimant just started working for employer

The claimant has numerous prior employers

The accident details are vague or inconsistent

The claimant is never home when the adjuster calls

There are no witnesses present at the time of the injury

The claimant has a prior claim history

The claimant is unusually knowledgeable about the workers’ compensation statutes, insurance terminology, or future medical prognosis

The length of recovery is excessive for the nature or extent of injury

The injury is reported days or weeks after the date of accident

The accident occurs in an area where the employee would normally not be working
The disability is not verified by the medical reports

The claimant treats with multiple doctors—“shopping” for the doctor that will keep him off work

The claimant was having prior financial difficulties

The claimant inquires about a settlement early in the claim process

The claimant’s spouse is receiving disability benefits

The claimant applies for social security disability before the workers’ compensation disability is established

The claimant misses doctors’ appointments or fails to attend an Independent Medical Evaluation

The claimant’s co-workers or others advise the claimant is working somewhere else


Red Flags for Property

The Insured has a new policy or the Insured contacted the agent to verify coverage or increase the policy limits shortly before the claim

The loss details are vague or inconsistent

The Insured has a prior claim history of several losses

The Insured is unusually knowledgeable about insurance terminology and the claim handling process

The Insured pushes for a quick settlement

The Insured is suspicious of the adjuster’s purpose and/or intent

The Insured delivers all documentation of the claim in person and avoids using the U.S. Mail

The Insured was away from the home at an unusual time—for example a 3 a.m. fire loss

The burglar alarm or fire alarm was turned off at the time of the loss

The items claim are inconsistent with the Insured’s remaining items, his income level, his residence, or business/occupation

The Insured is experiencing financial difficulties

The Insured does not know the location of purchase of expensive items

For fire claims:

Multiple points of fire origin

Burning is uneven

Fire burnt in a line—following the path of a incendiary agent

Personal items—family photos, heirlooms, etc., not among the debris

Absence of noncombustible property—coins, guns, jewelry, coat hangers

Absence of expensive items—electronics, collectibles, cameras, etc.

Doors and windows all covered with blinds, curtains to prevent early discovery of fire

Extensive inventory submitted a day or two after the fire

A large amount of cash alleged to have burned

For theft claims:

There are no signs of forced entry

Valuable items that could be easily carried away are still present

Theft of all contents, including items of little or no value

No receipts available for items stolen, or receipts are photocopies

No receipts for expensive items claimed, but receipts available for inexpensive items

Receipts from different vendors/companies/suppliers have the same handwriting or typeface

Single receipts with multiple items containing different handwriting or typeface

A large amount of cash

No police report is filed by the Insured

By no means are these lists of red flags a complete list of fraud indicators.  Many times the fraud indicators will be much more subtle.  It takes an experienced claims adjuster to recognize when things just don’t seem right and to initiate a fraud investigation.

For assistance with fraud claims,  Contact Us

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