Claim exaggerations are the most common form of fraud

A new report from automation and service provider FRISS, entitled Fraud Insights 2024: Emerging Trends, Threats, and Risks to the Global Insurance Industry, shows a large number of insurers globally do not have fraud detection and prevention platforms in place. The report also looks at the most common fraud scenarios (claims exaggerations), up to and including unique scenarios that are outlined in fraud case studies.

Unique examples listed include at least one instance where an AI generated identification was used to purchase a policy and where insurance was purchased for fictitious employees at a shell company. The report also looks at case studies involving amputation, attempted murder and one where a public adjuster filed multiple vandalism claims on their own property.

Looking at the technologies and tools used by insurance professionals, the report states that 30 per cent of respondents to the firm’s 5th survey, do not have a fraud detection or prevention platform in place. The survey’s researchers do not disclose how many responses were collected for the survey. 

In 2021 and 2023, survey respondents rated their fraud mitigation efforts on a scale of one to 10. Respondents gave their firms a score of 7.7 in 2021. This dropped to 5.9 in 2023.

Staged claims 

Furthermore, 69 per cent of respondents say they felt there was a rise in staged claims resulting from the global cost of living crisis. Following natural disasters, meanwhile, around the world respondents 63 per cent of the time said fraudsters took advantage of higher claims volumes; 62 per cent said they’ve seen exaggerated claims following catastrophes and 49 per cent noted that new fraud schemes often seemed to develop in the wake of natural disasters.

“During catastrophic events, high frequency, low severity claims like food spoilage, vandalism, and theft losses may be exaggerated. These claims may be handled by less experienced adjusters – or simply overwhelmed adjusters working cat duty – and fraudsters know a percentage of these fraudulent claims will be paid,” the report states.

In the United States alone, they say insurance fraud costs $308.6-billion (all figures in U.S. dollars), each year through higher premiums and elevated costs. Property and casualty (P&C) insurance fraud is estimated to cost around $40-billion annually, while casualty fraud adds another $6.8-billion to $9.3-billion to automobile casualty losses every year. Worker’s Compensation and premium fraud rings in at an estimated $34-billion annually.

Considered a trivial matter 

Globally, 61 per cent of respondents say people in their respective countries are generally not aware of the consequence of committing insurance fraud. “Some U.S. and Canadian respondents felt the repercussions of committing fraud in their respective countries were not serious enough to act as deterrents,” they write. “In other localities, respondents felt insurance fraud was considered a trivial matter, even by prosecutors.”