The Federal Bureau of Investigation estimates that illegitimate insurance claims cost about $40 billion every year. Indeed, insurance fraud is not a victimless crime.

Fraudulent claims raise the price of insurance for everyone, so it’s in a company’s best interest to verify that every claim is legitimate and accurate. Car accidents, personal injury, workplace injury and property damage are all common insurance claims that require an investigation.

Read on to learn what insurance investigations entail, examples of common claims, four key steps to take when you are conducting an insurance claims investigation, and tips for insurance claim fraud detection.

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What is an Insurance Claims Investigation?

Insurance companies often conduct claims investigations to evaluate the legitimacy of a claim. The investigation process helps the claims adjuster make an educated decision about how to proceed with a claim.

Insurance claims investigations are used to combat the prevalence of false or inflated claims. An illegitimate claim is unjustifiable or inaccurate, and by identifying it early you avoid paying potentially significant costs to insurance claim fraudsters.

Insurance claims investigations rely on evidence, interviews, and records to conclude whether a claim is legitimate or illegitimate.

There are several types of insurance investigations depending on the claim being made.

Types of Claims Investigated

Workers' Compensation Claims

Fraudulent workers’ compensation claims can be hazardous to the financial wellbeing of your business. To determine the legitimacy of a claim, an examiner will conduct a workers’ compensation claim investigation.

The investigation seeks to determine two things:

• Is the employee as injured as they claim to be?
• Was the injury acquired while the person was working?

For example, an employee who is injured outside of work Tuesday night but comes in the next day and files a claim indicating that the injury happened at work would be filing a fraudulent workers’ comp claim. Ideally, an investigation would uncover that lie.

Personal Injury Claims

Fraudulent personal injury claims can be equally as hazardous as fraudulent workers' compensation claims.

Personal injury claims can be filed against either a business or against another person. The claim becomes fraudulent when the victim actually fell on their own icy steps but staged the incident to look like it occurred in front of a company's storefront.

Property Damage and Theft Claims

Insurance companies will also investigate property damage (e.g., fire damage, water damage or car accidents) and theft claims (e.g., theft, burglary, hijacking or robbery).

Depending on the property and the claim, an investigator might call in an expert. For example, they might ask for someone to come in and evaluate the burn patterns to discover the origin and cause of a fire.

The information gained through this process will help the examiner either confirm or deny that the claim is legitimate.

Healthcare/Medical Fraud Claims

Medical fraud claims are investigated by private insurers and public ones, such as Medicare and Medicaid. Both the practitioner and the patient can participate in fake or inflated healthcare claims, sometimes together, to line their own pockets.

According to the Legal Information Institute, statistics now show that 10 cents of every dollar spent on healthcare goes toward paying for fraudulent healthcare claims. These insurance claim scams hurt not only the insurance companies, but also other customers, as fraud increases the cost of insurance plans to cover the losses.

Claims Investigation Process

The claims investigation process is similar to other investigations. It involves many steps, such as collecting and reviewing documents, taking statements, locating and interviewing witnesses, inspecting and photographing the damaged property or accident site, conducting surveillance, analyzing social media accounts, and insurance fraud reporting.

Collecting and Reviewing Documents

During your insurance claims investigation, request and collect official records stemming from the injury or damage.

For a personal injury claim, you can seek out official records created by the hospital or victim’s physician. Ask for medical release forms, prescription records, doctor’s notes, or any other document that could confirm the legitimacy and severity of the injury.

Ask for similar items for workers' comp claims, as well as the OSHA form detailing the incident.

For a property damage claim from a vehicle accident, request a copy of the police and accident report. These reports will have information from the day the accident was reported and can be used to corroborate statements and details obtained through interviews.

For a property theft claim, request receipts of the stolen item or photos proving the stolen item belonged to the victim. Sometimes a true victim of property theft will start padding their claim with additional items they didn't really own. Asking for proof of these items will help prevent exaggerated insurance claims.

Taking Statements and Interviewing

Interviewing the victim, witnesses and, if applicable, the perpetrator, will be one of the best information-gathering tools during an insurance claims investigation.

Depending on the claim, the questions you ask will differ. In a theft claim, ask what items were taken, when they first realized something was amiss and the names of any people who were in the home around the time of the theft. Read the original police report aloud and monitor how the claimant responds.

Request a recorded or written statement from all involved parties describing the incident and circumstances. Being able to hear or read the statement at a later time will make it easier for you to compare future information to what was said.

Surveying the Area and Suspect

Take photos or videos that will help the story make sense. Depending on the claim, take photos of the location (workplace, home, car, intersection) and the injury itself. Having access to a permanent, physical view of the environment will help you make sense of what the statements and official records say.

You may also want to conduct surveillance. If an employee claims they slipped on the icy steps of the hardware store and hurt their back, keep an eye on how they spend their time after. Did you catch them walking into the dance studio? Did they purchase a dining table and load it in their truck themselves?

Obtaining Other Contextual Information

Finally, consider other contextual information that will help you understand the claim.

Check the claimant’s social media accounts to learn more about them and the situation. Recent posts about struggling financially or hating work might raise suspicion. Posts about playing sports might cast doubt on an injury claim.

Look into whether they’ve made previous claims. Have they told the exact same story before? Did the last insurance claims investigation prove that the claim was fraudulent? A discovery like this may sway the outcome of the investigation.