Fraud cost insurers billions of dollars a year and some of
that cost gets passed onto consumers in the form of higher premiums. Recently,
the State of Florida passed a law that extends the time limit that insurers
have to pay off auto insurance claims, upping it from 30 days to 3 months. The
law also provided them with more tools to fight fraud.
The law was passed because Floridians discovered that
insurance fraud is far from a victimless crime. The cost of insurance was
skyrocketing, in the Miami area no-fault premiums have tripled over the last
five years. Organized criminals were “staging” accidents on the roadways and in
some cases innocent bystanders were getting hurt. These fraud rings included
everyone from lawyers and doctors to illegal immigrants. The ever increasing
number of fraudulent claims has cost Florida insurers roughly $1 billion a year
according to the American Insurance Association. These costs have been passed
on to policyholders via premium price hikes.
A recent study by FICO found that roughly 35 percent of
insurers believe that 20 percent of their claims are fraudulent. Over 50
percent of insurers expect that number to grow in the future according to the
study. The dramatic increase in fraud is why insurers welcome Florida’s new
law, it allows them time to properly investigate claims and look for fraud.
While Florida is helping insurers crack down on fraud, other
states, including some of the biggest population states make it more difficult
to fight fraud. No fault states require insurers to pay a claim quickly,
usually within 30 days without assigning fault. If they fail to pay within the
deadline, there can be significant fines. Fraudsters love no-fault states and
often set up sophisticated rings employing lawyers, doctors and less than
Insurers Fight Back
With Social Media and FICO
Insurers are working hard to fight fraudulent claims. They
have been taking advantage of social media as well as technology developed by
FICO to help root out fraud.
Social media has been in use for a number of years. Insurers
will check the various social media sites, Facebook, Linked In and Google for
any signs that fraud is being committed. They look for friends in common with
the person they had the accident with, indicating that they may know each
other. Photos that show a person
supposedly suffering from whiplash dancing or frolicking on the beach can be
used to dispute disability or injury claims.
Adjusters have been trained to dive in to the social media
world when investigating claims. It is surprising how many people post photos
and updates that directly contradict their claims. While social media is great for
catching everyday fraud, serious crime rings need more sophisticated efforts.
Using predictive analytics, insurers are able
to sift through millions of data files and link claims that involve the same
claimant or victim, flagging them for further investigation. Using the software
developed by FICO insurers can look for claims that happen shortly after
coverage is purchased or right before a car is sold. The software assigns
values to claims and the higher the score, the deeper the investigation will be.
FICO has helped credit card companies
fight fraud for years but have only recently moved into the insurance business.
Once the claim has been flagged the software will start examining other
connections, has their doctor been involved in other flagged claims, does their
name match known aliases and is their address a legitimate location and not a
P.O box are a few items they check.
While an insurer cannot outright deny a
claim due to these red flags, it can put an experienced adjuster on the case to
try to root out any fraud that might exist.
Insurance fraud is a multi billion-dollar
industry and insurers are using both social media and predictive analytics to
crack down on fraudsters. Florida is helping by giving insurers an additional
60 days to investigate claims.