How do Insurance Companies Identify Fraud?

Far from being a victimless crime, as is often touted, insurance fraud not only costs the insurers billions of dollars per year but this loss forces the policy premiums up for everyone else. Therefore, it is crucial that insurance companies are able to identify fraudulent claims and launch impartial third-party investigations into the incident and claimant to find out the truth. It can be very hard to detect fraud when it comes to insurance but there are a number of red flags investigators will look for. Here’s just a few of the most common ways in which fraudsters might get caught.


  • Repeated claims –Every time you make a claim, this becomes record so if you may numerous claims in a relatively small space of time, you will either have to prove you are incredibly unlucky or risk being accused of fraud. It is important to note that insurance companies are working together to prevent fraud and consequently share information about claims – attempts to hit multiple policy providers will also be identified.


  • Patterns in the policies – People are very predictable. Insurance companies will become suspicious if you raise the limits of the policy just before a large claim. They’ll also note if you ‘claim’ for an incident and then cancel your policy a few weeks later.


  • Your financial position – Some people turn to insurance fraud in the event of financial difficulties. If your bank records show you were struggling financially, took out an insurance policy and then began to make several claims which boosted your funds.


  • Lack of documentation – If you’re claiming something of value was stolen, such as a car, artwork or even a mobile phone, there will be a paper trail of the purchase. Failure to produce this is suspicious. Additionally, a lack of police reports will act as a red flag when the claimant has been a ‘victim’ of a crime such as theft or car jacking.


  • Poor staging – Burning your house down is an extreme version of insurance fraud but it does happen. If you happen to have moved all of your valuable artwork out for ‘restoration’ the week before or the fire started when you were undergoing renovation work and therefore none of your possessions were inside, insurers are going to question you. Similarly, some organised crime groups stage car crashes but some vehicles are subsequently revealed by investigations to have been hit at multiple impact points; a tactic which increases the damage but, when caught, invalidates the claim.


However, it is also important to note that there are times when credible claims come to insurance companies under these conditions which is why third-party investigators are brought in to find out the truth. Thanks to their thorough investigative skills and due diligence when it comes to catching those involved in this criminal activity, the professionals who investigate fraud, many of whom have a background in law enforcement, are steadily cracking down on those perpetrating insurance fraud in Australia.

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