Insurance fraud is a pervasive issue that plagues the insurance industry. In fact, it costs the United States $308.6 billion annually, and $40 billion of that fraud is due to non-health-related fraudulent claims.
As the tech landscape advances and perpetrators get more creative, companies must proactively recognize and combat fraudulent activities, including business-related claims fraud, claims fraud involving policyholders, and false claims made by contracted vendors. Fortunately, there may be a solution in AI and machine learning tools tailored specifically for insurance companies.
The Many Faces of Insurance Fraud
Insurance fraud is a pervasive issue that takes various forms, including business-related fraud, claims fraud, and false claims by contracted vendors. Even legitimate insurance companies can be involved in fraudulent activities like collecting premiums for bogus policies or evading state regulations.
Business-related insurance fraud schemes involve businesses committing actions such as inflating workers’ compensation claims, pocketing the difference, or engaging in money laundering. This particular type of fraud scheme often results in workers paying premiums for insurance that will never be provided by their employers. In some cases, the worker’s compensation provider is even in on the scheme, as illustrated in one attempt by a provider to defraud $54 million in workers’ compensation in 2023. In another scheme, companies will claim lower policy rates by misrepresenting their payroll records, claiming to have fewer employees in order to pay less to workers’ compensation policy providers. False claims by contracted vendors involve overcharging insurers for services rendered, leading to increased costs for the insurer and the insured party.
On the individual level, claims fraud involves policyholders and, on occasion, third parties. Policyholders may file false claims, exaggerate damages, or stage accidents to receive undeserved payouts from their casualty insurance coverage. In fact, financial losses due to healthcare fraud specifically (submitting claims for injuries or damages that have not happened) are between $68 and $300 billion, according to the National Health Care Anti-Fraud Association.
Despite the hefty penalties for those who commit insurance fraud, including large fines and jail time, claims fraudsters are not letting up anytime soon. Fortunately, there are some solutions currently in place to help mitigate their damage.
Regulatory Measures Against Insurance Fraud
To combat this growing problem, many states have established dedicated bureaus to investigate illegal activities within the industry. The National Association of Insurance Commissioners (NAIC) has also created a uniform reporting system to streamline efforts against fraudulent practices. The government has also enabled various task forces to target specific aspects, such as improper marketing tactics through robocalls and search engine advertisements promoting health plans.
One such task force is associated with NAIC, called the Antifraud (D) Task Force. This program assists state insurance officials by detecting, monitoring, and referring for investigation of potentially fraudulent insurance claims. They also conduct research on fraud trends and serve as a liaison between law enforcement and state-level regulators, as well as anti-fraud organizations and companies.
Additionally, the Coalition Against Insurance Fraud (CAIF), a national alliance of consumers, organizations, government agencies, and providers offers research and resources for consumers and businesses alike, to prevent them falling victim.
Leveraging AI and Machine Learning for Fraud Detection
Companies are getting smarter about detecting insurance fraud using advanced technologies like artificial intelligence (AI) and machine learning. AI and machine learning enable insurers to process large datasets quickly, allowing them to detect suspicious patterns that may indicate fraudulent behavior.
This helps insurance providers, businesses, and task forces catch fraudulent claims early, saving money and lowering premiums for their other customers. By using advanced technology, they can identify suspicious activities before they become costly claims.
Fraud.net’s Solution to Combat Fraud
Leveraging advanced AI-driven technology, Fraud.net helps companies safeguard their operations from various types of insurance scams, including money laundering and workers’ compensation schemes orchestrated by federal prosecutors, while ensuring that legitimate customers receive the insurance coverage they deserve.
We do this through original document verification, a function of our AppStore platform. Claims can be risk-scored against actual records and assessments made by insurance adjusters and can identify discrepancies that may indicate an attempt to commit insurance fraud.
Additionally, with regard to business-related fraud schemes, Fraud.net’s Know-Your-Vendor, powered by Application AI, ensures companies are legitimate and trustworthy. With this tool, you can verify that the third-party vendor, insurance provider, or partner organization is operating under a legitimate tax identification number, doesn’t have sanctions placed on it, is not a money laundering front, and so much more.
Don’t wait until it’s too late – contact Fraud.net today to see how to safeguard your business against insurance fraud.