When people think of insurance fraud, they often imagine policyholders submitting erroneous claims for damage they may have caused or being deceitful to the insurance company in order to get them to pay a claim, but a more insidious form of fraud is becoming more and more prevalent; insurance carrier fraud. Insurance carrier fraud involves unethical practices by insurance companies to avoid paying legitimate claims, reduce what get’s paid for the claim or unduly delaying claims. These practices not only harm policyholders but also undermine trust in the entire insurance industry. Fortunately, with advancements in technology—specifically artificial intelligence (AI)—public adjusters, policyholder advocates and policyholders now have more tools at their disposal to combat this insurance carrier fraud.
In this post we’ll focus on four common types of insurance carrier fraud: underpayment of claims, unreasonable denial of claims, delay tactics, and misleading claims investigations. We’ll explore each issue in detail and explain how AI can help public adjusters, policyholder advocates and policyholders fight back against these fraudulent practices.
1. Underpayment of Claims
Underpayment of claims is one of the most common forms of insurance carrier fraud. This happens when an insurance company intentionally offers a payout that is far below the actual cost to repair the damage for the claim. Insurers might use lowball or improperly written estimates and/or apply excessive depreciation to justify these reduced payments. For policyholders, accepting these underpayments can mean footing the bill for repairs that should be covered by the insurance.
How AI Helps:
AI can analyze a vast number of previous claims, providing public adjusters with a clearer picture of what an accurate settlement should look like. AI can help recognize potentially missing line items or incorrect line items on estimates, based on historical best practices for how to repair specific types of damage. These systems can also help track real time metrics of recoveries on claims. This can help public adjusters become more efficient on the estimates they are submitting for claims and recovering an ever increasing percentage of their demands. AI can also help aggregate estimates across insurance companies and identify if specific companies have a history of poor estimating practices.
An example of how AI can help; if an insurer submits a repair estimate for a roof that seems suspiciously low, an AI system can instantly identify potential missing line items such as items required for code compliance in a given municipality. This feedback empowers public adjusters to challenge these improper insurance company estimates and prepare a valid and coherent rebuttal.
2. Unreasonable Denial of Claims
This may be the area where insurance companies take advantage of policyholders the most. Unreasonable claim denials happen when an insurance company wrongfully rejects a legitimate claim, often citing policy exclusions and/or misrepresenting or intentionally misinterpreting the policy language. This practice is particularly underhanded because most policyholders trust that their insurance company’s representative is an expert or at least knowledgeable about their policy. This practice more than any other undermines trust in insurance companies.
How AI Helps:
Traditional analysis of policies and the language contained in the policies is typically manual, requiring hours of reading through these policy documents. AI-powered systems can analyze insurance policies and claims documentation with exceptional speed and accuracy. Through Natural Language Processing (NLP), AI can interpret complex policy language and provide concise, yet comprehensive summaries of the policy language that is relevant to the specific claim. This helps save time for public adjusters, allowing them to maximize their expertise with policies.
With AI’s contextual recommendations, it can provide public adjusters with suggestions about a policy or a claim based on the primary topic the public adjuster is researching. Additionally, AI can review prior claim denials by the same carrier and flag patterns of wrongful denials. For example, if a specific insurer has a history of denying claims for a particular type of damage, AI can spot this trend and provide evidence and help craft an argument back to contest the denial.
3. Delay Tactics
Delay tactics are a common strategy used by insurers to frustrate policyholders into accepting lower settlements or abandoning their claims altogether. These tactics can include requesting excessive documentation, stating they could not proceed with their investigation due to documents not being received, repeatedly asking for the same information, or taking excessive time to respond to inquiries. For policyholders, these delays can be financially and emotionally draining.
How AI Helps:
AI can be a powerful tool for identifying and combating delay tactics. It can be used to track timelines and communication patterns, AI can automatically flag claims that where the insurance company is creating excessive delays in the claims process. For example, AI can identify statutory time requirements for insurance companies and flag the claim if the insurance company does not adhere to those timeframes.
AI-driven systems can also automate much of the claims follow-up process. By creating AI assistants, a system can help automatically follow up and/or ping an insurance company for a claim. This doesn’t force the insurance company to respond but ensures that any delays with a claim are the result of the insurance company’s actions.
In certain cases if the insurance company has been delaying the claim, the AI can help provide suggestions to the public adjuster on courses of action that can taken to potentially compel the insurance company into progressing the claim.
4. Misleading Claims Investigations
It may be willful neglect or just laziness by the insurance companies, but it seems like less and less is being done to properly investigate claims. Inadequate or biased investigations are another form of carrier-side fraud. In some circumstances insurance company adjusters or representatives may even have a clear bias against a public adjuster. Insurers may conduct surface-level investigations, ignore critical evidence, or rely on experts who routinely provide lower damage estimates and reports that intentionally support a denial position by the insurance company. By failing to conduct thorough investigations, insurance companies can deny or underpay claims, directly harming policyholders by not indemnifying them properly for their loss.
How AI Helps:
It seems to be a common practice for insurance companies or their representatives, like engineers to reuse language on their correspondence. AI can help aggregate and reference past report, letters and other documentation and identify if the language on a new document has been reused in the past. By providing the AI with specific and detailed instructions, it can even provide feedback and probability that the carrier or their representative may be acting in a fraudulent manner.
For example, if an insurance company sends an engineer to perform an inspection and submit a report of their findings on a claim. The AI can take that report and reference it against past reports and identify if there is reused language and how much of it has been reused from past reports. This can potentially provide the public adjuster with something like a “fraud score.” The AI can also reference if a certain insurance company only uses a specific engineer or other expert which may indicate that expert may have a bias in favor of the insurance company.
Conclusion: AI can provide huge advantages for public adjusters
Insurance company fraud, whether through underpayment, wrongful denials, delay tactics, or misleading investigations, undermines the insurance industry and harms policyholders. However, with the advent of AI, public adjusters, policyholder advocates and policyholders now have access to powerful tools that can help fight back against these unethical practices.
AI systems provide clarity, accountability and efficiency during the claims process, ensuring that insurance companies act in good faith and pay what they owe for claims. From automating document analysis to flagging suspicious patterns in how the insurance company is handling the claim, AI equips public adjusters with the evidence and insights they need to hold insurance companies accountable.
As AI technology continues to evolve, its role in fighting insurance company fraud will only grow stronger. Public adjusters can benefit from embracing AI, knowing that it helps to level the playing field in an industry where a lot is at stake for their clients, the policyholders.
Insurance company fraud is garnering more and more attention to help level the playing field between multi-million dollar insurance companies and the policyholder. Organizations like the American Policyholder Association and United Policyholders are doing a lot to help bring insurance company fraud to the forefront and help fight its injustice.
Ready to bring AI into your claims process? Explore how the leader in AI for claims management for public adjusters, Claim Mosaic can help you fight insurance company fraud and recover better settlements your clients. Sign up today for a free 14-day trial and experience the future of claims management!